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Things to Note before Investing in Senior Citizen Savings Schemes

Things to Note before Investing in Senior Citizen Savings Schemes

Senior Citizen Savings Scheme (SCSS) is one of the popular schemes available for senior citizens. It is a comprehensive investment scheme designed to offer maximized returns to senior citizens and retirees. It is considered to be an ideal scheme for senior citizens as it offers robust returns upon maturity. Before you invest in the scheme, here are a few things that you should take care of:

Eligibility

The senior citizen savings scheme is made precisely for citizens above 60 and now added the age group of 55 as well keeping in mind their requirements after they have no solid monthly income.  The account in this scheme can be started only after or at the age of 60 also or if you have opted for a voluntary retirement option.  Defence personnel who are of 50 years and above age can also invest in this scheme. The scheme also offers the benefit of nomination or holding a joint account with the spouse, and the one that deposits

first will be the investor. 15 lakhs are the investment amount and Rs. 1000 is the amount in which the amount is to be deposited.

Tax Benefits and Laddering

For an income tax deduction investment up to 1.5 lakhs is allowed under Section 80C of the Income Tax Act. So, instead of investing the whole amount in one go, the investment can take place in parts every year. For example, if someone needs to invest 9 lakhs in the scheme, they can invest 3 lakhs every year instead of investing the whole amount in one go. By analysing the scheme one can easily enjoy the benefits of cutting down on the tax payments. In this case, even if you have to discontinue one of your investments, the others would be in place adding to your accumulated retirement savings. 

Tax Deductible at Source

As the interest income is reduced one has to take of tax deductible at source.  According to the Section 80TTB of the Income Tax Act, Rs. 50,000 is exempted for the deposits made by senior citizens as per the current financial year. If your interest income is below the tax exemption limit, you can apply for 15H declaration to ignore TDS. This way along with multiplying your savings, you can also save up on taxes.

Penalty on Premature Withdrawal

 As the interest income for this scheme is assigned from the start and does not rely on the market fluctuations the money deposited needs a lock in period. In case of a premature withdrawal, the investor is liable to pay a penalty according to the financial rules set for the scheme. Any withdrawal before two years and done after a year will be liable for a penalty of 1.5% on the amount that is withdrawn.  If the amount is withdrawn after two years of deposit then the penalty will be the same percentage as of the amount being withdrawn. 

Therefore, instead of going for investments in one go, you can choose to invest in parts to avail the benefits as there is no monthly income to contain the regular expenses. This can help in dividing the expenses accordingly and will help in living without any financial crunches.

Fixed Deposits

Fixed deposits are also an alternate option to invest in a savings schemes for senior citizens. It provides an interest rate of 7.5% and is flexible in tenor options ranging from 15 days to 10 years. Bajaj Finance is one such Non-Banking Financial Corporation where the interest rates are 8%-9% and the market rates do not affect the interest rates. The tax deduction amount is Rs. 50,000 under Section 80TTB where the senior citizens can claim for reduction on the final amount that they receive every financial year.

It is recommended that senior citizens invest their savings in different avenues for a diversified and safer portfolio. You can opt to invest some amount in a Fixed Deposit by Bajaj Finance along with SCSS, to enjoy definite and higher returns at flexible tenors. Moreover, you also get the ease of managing your account online,  making managing of investment simpler and effortless.

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