Numerous investment options are available for senior citizens, some government-backed and others private. Senior Citizen Saving Scheme (SCSS) and Senior Citizens Special FDs are the most popular. Senior citizens prioritize two things when it comes to investing: first, decent guaranteed returns, and second, regular income for sustenance.
This article will look at the Senior Citizen Savings Scheme (SCSS) and Senior Citizens Special FDs to assess which is best for your investment needs.
Table of Contents
Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Savings Scheme (SCSS) is a government-supported investment scheme crafted for senior citizens who can invest a lump sum to earn a regular income to cover their expenses.
Features
| Description | Features |
| Age (Min, Max) | Min age: In case of- General Public: 60 years Superannuation or VRS: 55-60 years Defense Pensioners (excl civilian defence personnel): 50 – 60 years Max age: No upper age limit |
| Tenure of deposit | 5 years, with the option to extend for another 3 years. A maximum of one extension is permitted. |
| Amount of deposit | Min: Rs. 1000 Max: 30 Lacs (revised limit as per Budget 2023)Interest Rate100 basis points above 5 years over government bond yield (From 01/01/23 to 31/03/23 applicable interest – 8%)Loan FacilityNot availableTDSAs per the applicable tax slabCan be Availed throughNotified banks and Any Post OfficePremature withdrawal/ ClosurePre-mature withdrawal is allowed only after one year. Closed before 2 years – 1.50% After 2 years – 1% No pre-closure penalty if closed in the extended period. |
The Perks of the Senior Citizen Savings Scheme (SCSS)
- Safe and secure investment vehicle
- Guaranteed returns
- Higher rate of interest
- Good source of regular income
- Tax exemption u/s 80C available
Drawbacks of the Senior Citizen Savings Scheme (SCSS)
- Investor loses the benefit of compounding due to quarterly interest payout. So, this scheme may not benefit those who immediately need regular income for their living expenses.
- Interest paid is taxable therefore reduces the net interest earned post taxes
- A loan facility is not available under Senior Citizen Savings Scheme (SCSS)
- If you don’t close SCSS post maturity, you get an interest of 4%, applicable in the Post Office savings bank account.
Senior Citizens Special FDs
1. SBI We Care FD
The largest nationalized bank launched a senior citizens special FD called “SBI We Care FD”, designed specifically for senior citizens. This product falls under the Retail TD segment and is available as a new deposit or a renewal of maturing deposits with the bank.
Features of Senior Citizens Special FDs Scheme: SBI We Care
| Description | Features |
| Eligibility | Minimum Age: 60 years |
| Tenure of deposit | Min: 5 years Max: 10 years |
| Interest Rate | 100 bps over rate offered to the public |
| Loan Facility | Available (Interest of 1% above the relative FD rate) |
| TDS | As per the applicable tax slab |
| Can be Availed through | Branch/Internet Banking/YONO |
| Valid till | 31.03.2023 |
| Interest Rate | 7.50% (w.e.f 15.02.23) |
2. ICICI Bank Golden Years FD
ICICI Bank introduced a special senior citizen FD scheme named “ICICI Bank Golden years FD” on 20th May 2020 as a tool of income protection by providing additional interest of 30 basis points.
| Description | Features |
| Eligibility | Minimum Age: 60 years Max Deposit: Rs. 2 crore |
| Tenure of deposit | Min: 5 years 1 day Max: 10 years |
| Interest Rate | 60 bps over rate offered to the public |
| Loan Facility | Available. Bank, at its discretion, may offer a loan/OD facility at an interest rate of 2% above the contracted rate with a reduction of up to 1% as per the terms and conditions of the Bank. |
| TDS | As per the applicable tax slab |
| Can be Availed through | Branch/Internet Banking |
| Valid till | 31.03.2023 |
| Interest Rate | For single deposit Less than Rs. 20mn – 7.50% (w.e.f 24.02.2023) Above Rs. 20mn but less than Rs. 50mn – 6.75% (w.e.f 06.03.2023) |
| Premature withdrawal/ Closure | On or after 5 years 1 day – 1.10% Before 5 years, 1 day – 1% |
3. HDFC Senior Citizens Care FD
This senior citizens special FDs scheme named HDFC Senior Citizens Care FD, was launched on 20th April 2020 to facilitate a regular source of income for senior citizens. The private sector giant offers premium interest rates to its senior citizen customers (both on new deposits and renewals), helping them generate regular income to meet the rising costs.
| Description | Features |
| Eligibility | Minimum Age: 60 years Maximum age: 80 years Max Deposit: Rs. 5 crores Minimum amount: Rs. 10,000 |
| Tenure of deposit | Min: 1 year: 10 years |
| Interest Rate | 75 bps over rate offered to the public The Tenor Interest Rate >1 year – 2 years 7.50 % | >2 years- < 3 years 7.25% | 3 years – < 5 years 7% | 5 years 7% | >5 years – 7 years 7% |
| Loan Facility | Available |
| TDS | As per the applicable tax slab |
| Can be Availed through | Branch/Internet Banking/Phone Banking |
| Valid till | 31.03.2023 |
| Interest Rate | 6.50% |
| Premature withdrawal/ closure | Allowed. A penalty of 1.0% will be levied. |
4. IDBI Naman Senior Citizen Deposit
IDBI launched this special senior citizens FDs scheme on April 20, 2022, to alleviate the growing inflationary pressures on senior citizens by providing regular income sources.
| Description | Features |
| Eligibility | Minimum Age: 60 years Max Deposit: Rs. 2 crore |
| Tenure of deposit | Min: 5 years 1 day Max: 10 years |
| Interest Rate | 60 bps over rate offered to published ic |
| Loan Facility | Available (Interest of 1% above the relative FD rate) |
| TDS | As per the applicable tax slab |
| Can be Availed through | Branch/Internet Banking |
| Valid till | 07.04.2023 |
| Interest Rate | For single deposit Less than Rs. 20mn – 7.50% (w.e.f 24.02.2023) Above Rs. 20mn but less than Rs. 50mn – 6.75% (w.e.f 06.03.2023) |
| Premature withdrawal/ Closure | On or after 5 years 1 day – 1.10% Before 5 years 1 day – 1% |
Drawbacks and Limitations of Senior Citizens Special FDs
- There is no tax exemption available.
- Premature withdrawals incur a penalty.
- Reinvestment risk exists. As the senior citizens special FDs renew automatically, you may earn lower interest rates upon reinvestment.
- Only domestic deposits are eligible.
- Inflation risk as the interest rate is lower than the inflation rate.
- Lack of flexibility because each scheme has specific requirements you must meet.
Comparison: Senior Citizen Savings Scheme (SCSS) vs Senior Citizens Special FDs
| Senior Citizen Savings Scheme (SCSS) | Senior Citizens Special FDs | |
| Revision in Interest Rate | Quarterly by Govt. of India | Decided by the bank from time to time |
| Amount of deposit (Min, Max) | Min Investment: Rs. 1000 Max Investment: Rs.30 Lacs | Min Investment: Rs. Max Investment: Rs. |
| Tax Benefits | Tax exemption allowed under Sec 80 C up to Rs. 1.5 lacs. | No tax benefit allowedLock-in-period5 yearsNo lock-in periodInterest PayoutQuarterly (on 1st working day of every financial quarter)Monthly/Quarterly/Annually Or At maturity, the principal plus accrued interest is paid. |
| Loan Facility | Not Permitted | Loan facility allowed |
| Liquidity | Less liquidity | High Liquidity |
Key Takeaways
As you approach retirement age, you are done with your financial planning and responsibilities. Aside from capital appreciation, you require an additional source of regular income to supplement your living expenses.
You should be clearer now if you were undecided between the Senior Citizen Savings Scheme (SCSS) and the Senior Citizens Special FDs scheme. We hope that the information in this comprehensive guide has made building a healthy portfolio that generates consistent income much more straightforward.
FAQs
Can Senior citizens open both a Senior Citizen Savings Scheme (SCSS) account individually?
Yes, but the total investment per investor should not cross the upper limit of 30 lacs as proposed under Budget 2023.
What happens in the event of the death of the SCSS account holder?
If a Senior Citizen Savings Scheme account holder dies, the account is closed at the request of the nominee/legal heir, and interest is paid only until the account holder’s death.
How can I save TDS on Senior citizens special FDs?
If your taxable income, including interest income, is less than the taxable limit, you can avoid TDS deduction by submitting form 15 H to your respective bank. If your total interest income exceeds Rs. 50,000, you are taxed at a lower rate (i.e. 10%). You can fill out Form 12 BBA and save the excess TDS deduction.