After you retire, some wise decisions are needed in terms of financial planning. Senior Citizen Saving Schemes (SCSS) and Fixed Deposits (FDs) are two popular low-risk schemes for senior citizens. Both plans are government-backed and safe but differ from each other in some aspects like tax implications, lock-in periods, and returns.
SCSS is a government guaranteed savings scheme for individuals who are 60 years and older. It’s best for pensioners who desire a guaranteed income, as it provides a fixed return. The scheme has a lock in of 5 years, which can be extended by 3 more years.
Although banks and non-banking financial companies (NBFCs) do offer FDs, or time-bound investments with preferential interest rates for older people. They can be customized to short- or long-term needs and provide flexibility in duration from 7 days to 10 years.
SCSS will offer an attractive interest rate of 8.2% per year, to be paid quarterly, by 2025. This is an attractive competitive rate for senior investors, as the government reviews this rate every 3 months.
Usually, senior citizen FDs offer 0.25% to 0.75% interest compared to standard FD rates. As an example, in a prominent bank, senior residents get around 7.5% interest annually.
SCSS has a lock-in period of 5 years, which can be extended by 3 more years. After 1 year, withdrawals are allowed, but penalties will apply.
FDs provide a wider range of options, from a few days to several years in their tenure, and provide a very limited penalty for early withdrawals. Therefore, they are definitely more liquid than SCSS and appropriate for short term objectives.
Section 80C is applicable to both SCSS and FDs, and a deduction of up to Rs 1.5 lakh is available in any given financial year.
However, both require tax payment, i.e., tax withheld on the interest earned. For senior citizens, TDS is withheld if the annual interest exceeds Rs. 50,000 in both cases. SCSS likely has a larger interest amount than FDs, but taxes for both loans are similar too.
SCSS is a government-backed scheme which provides the highest security. Bank FDs are also considered secure, but in case a bank undergoes liquidation/DICGC incus losses. Deposit insurance is limited to Rs.5 lakh per depositor for bank FDs, with additional conditions.
Feature | SCSS | FDs (Senior Citizen) |
Eligibility | 60 years and above | Senior citizens (usually 60+) |
Interest Rate (2025) | 8.2% p.a. (quarterly payout) | 7% - 7.75& p.a. (varies by bank) |
Tenure | 5 years (extendable by 3 years) | 7 days to 10 years |
Lock-in Period | 5 years | Depends on chosen tenure |
Tax Benefit under 80C | Yes, up to Rs. 1.5 lakh | Yes, up to Rs. 1.5 lakh |
Interest Taxability | Taxable | Taxable |
Premature Withdrawal | Ater 1 year (with penalty) | Allowed (penalty may apply) |
Risk | Extremely low (Govt. Backed) | Low (Bank/NBFC insured up to Rs. 5 lakh) |
Investments in SCSS require you to invest in multiples of Rs. 1000 after the first Rs. 1000 deposit.
Yes, you can have both investments to minimize risk and manage your retirement portfolio with more flexibility.
SCSS is offered at designated post offices and selected authorized public and private sector banks.
Yes, form 15H can be submitted to avoid TDS if your total income is below the taxable limit.
SCSS pays interest quarterly, whereas in FDs you can choose monthly, quarterly, or cumulative payout options.
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