Elderly people trying to find assured revenue for his or her golden years are nonetheless discovering put up workplace schemes to be a preferable choice to take a position, regardless of the rising rates of interest of financial institution fastened deposits. The Senior Citizen Savings Scheme (SCSS), which provides an rate of interest of seven.4% per 12 months—considerably increased than the retail inflation price of seven% and even increased than the rates of interest of financial institution fastened deposits from establishments like SBI—is a transparent instance of a greater funding choice reserved just for senior residents. The Senior Citizen Savings Scheme (SCSS) is a government-backed, risk-free put up workplace scheme. It gives retirees with a assured return, and by investing in SCSS, seniors could get an annual risk-free revenue of greater than ₹2 lakh. Let’s have a look at how this works.
Individual funding in SCSS
In a round dated June 30, 2022, the Ministry of Finance reported that the federal government has saved the small financial savings rates of interest unchanged for the July-September quarter of the fiscal 12 months 2022-23. An particular person over 60 can open an SCSS account by making a single deposit into the account in multiples of INR 1000 and as much as a most of INR 15 lakh. Just like tax-saving fastened deposits of banks, SCSS comes with a lock-in tenure of 5 years. Now let’s assume that the present rate of interest of SCSS will stay locked in for the following 5 years and a senior citizen is able to make investments ₹15 lakh within the scheme for five years.
Therefore, a deposit of ₹15 lakh would earn ₹27,750 as a quarterly curiosity cost on the present rate of interest of seven.4% and the annual curiosity cost shall be ₹111,000. Hence at maturity, the account holder will get a maturity quantity of ₹5,55,000. The curiosity quantity beneath SCSS is payable on a quarterly foundation and is relevant from the date of deposit to the next dates: March 31, June 30, September 30, and December 31. The price of curiosity that was in impact on the day of the deposit stays locked in for the tenure of 5 years, aside from the truth that the rates of interest on small financial savings schemes are revised on a quarterly foundation by the Government of India.
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SCSS Calculator (cleartax.in) Impact of joint funding in SCSS
The aforementioned illustration solely represents one funding that an individual makes. However, SCSS additionally permits joint deposits, thus a senior citizen and his partner can register a joint account. However, solely the primary account holder is accountable for the entire deposit quantity in a joint account. The most funding cap of ₹15 lakh shall be doubled to ₹30 lakh in joint account instances. In this occasion, the aged couple’s total yearly curiosity from every of their SCSS accounts could be ( ₹111,000×2 = ₹222,000). Hence, the joint couple would get a yearly risk-free revenue of ₹2.22 lakh by investing in SCSS. “In case partner is a joint holder or a sole nominee, account might be continued until maturity if partner is eligible to open SCSS account and never have one other SCSS Account,” India Post stated on its web site.
Key takeaways of SCSS
Investments made beneath this plan are eligible for the tax deductions supplied by part 80C of the 1961 Income Tax Act. If the general curiosity earned throughout all SCSS accounts surpasses Rs. 50,000 in a fiscal 12 months, the curiosity is taxable, and TDS on the applicable price must be deducted from the overall curiosity earned. If type 15 G/15H is submitted and picked up curiosity revenue doesn’t exceed the permissible threshold, no TDS shall be utilized to the account holder. After 5 years from the date of account opening, an SCSS account could also be closed, however the account holder could select to maintain the account open for a further three years from the date of maturity.
Within a 12 months of maturity, an SCSS account might be prolonged, and the prolonged account will proceed to accrue curiosity on the price that was in operation on the maturity date. SCSS additionally permits untimely withdrawals at any time put up the account’s lively date. For occasion, if an account is discontinued earlier than one 12 months, no curiosity could be payable; If the account is terminated after one 12 months however earlier than two years from the date of opening, 1.5% of the principal shall be deducted. If the account is closed after two years however earlier than 5 years from the date of account institution, 1% of the principal shall be deducted by the accountable put up workplace. Nevertheless, an prolonged account could also be closed or liquidated after a 12 months from the date of extension with out incurring any penalties.
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