Senior Citizen Savings Scheme (SCSS) provides a government-backed mode of investment to elderly people. Any person over the age of 60 can invest in the scheme. The five-year plan earns 8.2 percent interest per annum. While SCSS provides a secure investment with a fixed rate of investment, there are some disadvantages of the scheme as well. Investors have to keep the pros and cons of the scheme in mind before putting their money in the SCSS. Here are the advantages and disadvantages of this scheme.
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Advantages:
Tax benefits:
Investors can gain tax benefits under section 80C of Income Tax Act. Investors can get up to Rs 1.5 lakh deduction u/s 80C.
Safe to invest:
Since the SCSS is backed by the government, it is safe to invest in. There is less chance of default or loss in the SCSS. People can deposit up to Rs 30 lakh in the SCSS.
Premature withdrawals allowed:
Investors can withdraw their money after one year from the opening of the account. If any person makes the decision to close the account within one year of opening it, no interest will be given and the principal amount will be returned.
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Accounts can be transferred across the country:
In case the investor shifts to another place, they can easily get the SCSS transferred to the bank/post office branch closest to them.
Disadvantages:
No interest on unclaimed interest income:
The Senior Citizen Savings Scheme pays interest every quarter. If the interest is not claimed by the account holder, no additional money will be earned on it.
TDS on SCSS:
Tax Deducted at Source (TDS) will be cut from the interest accrued in a SCSS account if the total interest exceeds Rs 50,000 in a financial year.
Fixed interest rate:
The interest rate under the scheme is fixed, meaning that individuals who opened the account earlier, may be at a disadvantage. They can open a new account to avail a better rate of interest, but some charges will apply.
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Age limit
Only individuals over the age of 60 can avail the benefits. Defence employees between 50 and 60 years or civilian employees from 55 to 60 years can invest in the scheme, provided they have opted for Voluntary Retirement Scheme (VRS) or superannuation. People in their 30s and 40s, who wish to take advantage of the scheme, cannot avail its benefits.
All in all, the SCSS is an advantageous scheme for senior citizens, provided they remain aware of what tax benefits are applicable and what are not.
