The Senior Citizen Savings Scheme (SCSS) has been launched by the government to help elderly people save more money for their later years. Anyone who is at least 60 years old can invest in this plan. The unique feature is that this government programme offers higher interest rates than bank FDs. Investing in SCSS has many benefits, but there are some drawbacks as well. Therefore, before taking the plan, senior citizens should be aware of its benefits and drawbacks.
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Senior Citizen Savings Scheme (SCSS) investments receive 8.2% interest from banks and post offices. For the quarter ending in April–June, the government raised the interest rate from 8% to 8.2%. The interest rate stays the same after money is put in this plan throughout the duration. From April 1, senior citizens can invest up to Rs 30 lakh in this programme.
A significant drawback of the scheme is TDS being deducted from the interest received in this scheme. In contrast to the Public Provident Fund Scheme, TDS is imposed on SCSS payments that exceed the threshold of Rs 50,000 in a fiscal year.
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Seniors now have more investment options than ever, thanks to SCSS’s current interest rate of 8.2%, but those who opened accounts in the programme earlier when the interest rate was lower are at a disadvantage. To take advantage of the current higher interest rate, they can close their old SCSS account and start a new one if they so choose. However, the bank imposes some fees for the premature cancellation of an SCSS account.
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Only seniors who are at least 60 years old can open a SCSS account. Employees in the private sector who want to retire early are not eligible for this programme. Investments made in SCSS accounts have a 5-year lock-in term with a further 3-year extension. Some investors might be forced to incur a loss because of the lock-in period and the penalty for premature withdrawal.
