SCSS is a lucrative option for pension holders with tax benefits, higher interest rates and loan facilities. The government has recently increased the interest rates for the Senior Citizen Savings Scheme (SCSS) for the January-March quarter of FY2022-23 to 8%. Also, the investment limit has increased from Rs. 15 lakhs to Rs. 30 lakhs in the union budget 2023-24.
The Senior Citizen Savings Scheme (SCSS) is a government-backed savings scheme designed for senior citizens (individuals aged 60 years or above) in India. The scheme offers several benefits to senior citizens, including:
- High Interest Rates: The interest rate on SCSS is typically higher than most other savings schemes. As of March 2023, the current interest rate on SCSS is 8% per annum, which is subject to change as per government policies.
- Tax Benefits: Investments made in SCSS are eligible for tax benefits under Section 80C of the Income Tax Act, (as per old tax regime) up to a maximum limit of Rs. 1.5 lakh per year. Additionally, interest income earned from SCSS is taxable under the Income Tax Act, but senior citizens can claim a deduction of up to Rs. 50,000 per year under Section 80TTB of the Income Tax Act.
- Guaranteed Returns: The returns on SCSS are guaranteed by the government, which means that senior citizens can be assured of a fixed rate of return on their investment.
- Low Risk: SCSS is a low-risk investment option as it is backed by the government. It is a good option for senior citizens who want to invest their savings in a safe and secure instrument.
- Flexible Investment Amount: The minimum investment amount for SCSS is Rs. 1,000, and the maximum investment amount is Rs. 30 lakh. Senior citizens can invest any amount between these two limits in multiples of Rs. 1,000.
- Flexible Investment Tenure: The investment tenure for SCSS is five years, which can be extended for an additional three years. Senior citizens can also make premature withdrawals subject to certain conditions.
Increasing the investment limit to Rs. 30 lakhs would provide senior citizens with the opportunity to invest a higher amount of money in the scheme and earn a higher rate of interest while enjoying the safety and security of a government-backed investment option.
Loan facility in SCSS
a loan facility is available for Senior Citizen Savings Scheme (SCSS) account holders. Here are the key points to know about the loan facility:
- Eligibility: SCSS account holders can avail of a loan facility after completing one year from the date of account opening.
- Loan Amount: The maximum loan amount that can be availed is 50% of the account holder’s deposit amount.
- Interest Rate: The interest rate on the loan availed against SCSS is 1% higher than the interest rate payable on the SCSS deposit. So, if the SCSS interest rate is 8%, then the loan interest rate will be 9%.
- Repayment: The loan amount and interest are to be repaid in one lump sum, either at the end of the loan tenure or on the maturity of the SCSS account, whichever is earlier.
- Loan Tenure: The loan tenure is three years from the date of availing the loan. If the loan is not repaid within the stipulated time, then the outstanding loan amount will be recovered from the account balance at the time of maturity.
- Security: The SCSS account balance is the collateral for the loan availed. The account holder needs to execute a loan agreement and pledge the account balance to the bank or post office.
- Premature Closure: In case of premature closure of the SCSS account, the outstanding loan amount along with the accrued interest needs to be repaid before the account is closed.
Overall, the loan facility against SCSS is a useful option for senior citizens who may need funds during an emergency or for other purposes. However, it is important to remember that the interest rate on the loan is higher than the interest rate on the deposit, and the SCSS account balance is used as collateral for the loan. It is important to weigh the benefits and risks before availing of the loan facility.
