Senior Citizen Savings Scheme (SCSS): Advantages and Disadvantages Explained
The Senior Citizen Savings Scheme (SCSS) is a popular post office scheme specifically designed for individuals aged 60 years and above. While the SCSS offers several advantages, it is important to be aware of its limitations and disadvantages before considering it as an investment option.
Let’s explore these factors in detail:
- Higher Interest Rates:
- SCSS offers competitive interest rates compared to other post office schemes, currently standing at 8.2% for the April-June period.
- The interest rate remains fixed throughout the investment tenure, providing a stable income stream.
- Investment Limit:
- SCSS imposes an investment limit, which was recently increased from Rs 15 lakh to Rs 30 lakh in the 2023 Budget.
- Investors cannot invest more than the specified limit in the SCSS.
- Tax Deduction at Source (TDS):
- If the interest earned on SCSS exceeds Rs 50,000 during a financial year, TDS is applicable.
- The TDS rate is 10% on the interest amount, and it is deducted by the post office or bank at the time of interest payment.
- Benefit of Interest on Interest:
- SCSS pays interest to investors on a quarterly basis.
- However, it is important to note that investors must claim the interest each quarter; otherwise, no interest is paid on the accrued interest amount.
- Age Limit and Lock-in Period:
- Only individuals aged 60 years or above are eligible to invest in the SCSS.
- The scheme has a lock-in period of five years, during which the invested amount cannot be withdrawn.
- After the completion of the initial lock-in period, investors have the option to extend the scheme for an additional three years.
Understanding the advantages and disadvantages of the SCSS allows investors to make informed decisions based on their financial goals and requirements.