Senior Citizen Savings Scheme vs Fixed Deposit

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. 

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Understanding the Basics of FDs and SCSS

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.  

Interest Rates and Returns

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.  

Liquidity and the Lock-in Period

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.  

Deduction and Taxes 

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. 

Risk and Safety Consideration

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.  

SCSS vs Fixed Deposit

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) 

FAQs on SCSS Vs FD

  • What is the minimum investment in SCSS?

    Investments in SCSS require you to invest in multiples of Rs. 1000 after the first Rs. 1000 deposit. 

  • Is it possible to open both FDs and SCSS at the same time?

    Yes, you can have both investments to minimize risk and manage your retirement portfolio with more flexibility.  

  • Are SCSS accounts available at all banks?

    SCSS is offered at designated post offices and selected authorized public and private sector banks.  

  • Do senior citizens need to complete Form 15H for SCSS or FDs?

    Yes, form 15H can be submitted to avoid TDS if your total income is below the taxable limit.  

  • Which gives monthly interest payout – SCSS or FD?

    SCSS pays interest quarterly, whereas in FDs you can choose monthly, quarterly, or cumulative payout options. 

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