In the realm of saving schemes, Senior Citizen Saving Schemes (SCSS) and Fixed Deposits (FD) are two strong competitors that offer different attributes suitable for diverse investor needs. Both the schemes are popular, credible and have their own set of advantages and downsides. In the sphere of saving for the future, it is crucial to make an informed choice between SCSS and FD.
Hinging on the keywords SCSS vs FD and Fixed Deposit India, this article focuses on comparing the interest rates and tax benefits of both SCSS and FD to help you make intelligent, well-informed financial decisions.
Senior Citizen Saving Scheme (SCSS)
Introduced by the Government of India, the Senior Citizens Saving Scheme is an appealing long-term saving scheme for retirees. The age criterion for an SCSS is 60 years and above, or 55 years for those who have opted for voluntary retirement. Moreover, retired defense personnel, irrespective of their age, can also choose this savings option.
The present SCSS interest rate stands at 7.4%, effective from 1st April, 2020. This interest rate is revisited quarterly by the government, but once invested, the rate remains constant throughout the tenure.
The maximum amount that can be invested in SCSS is ₹15 lakhs, and the scheme comes with a lock-in period of five years, extended to three additional years. Interest earned is taxable, but the amount invested is deductible under section 80C of Income Tax Act, up to a limit of ₹1.5 lakhs in a financial year.
Fixed Deposit India
A fixed deposit is an investment product offered by banks and Non-Banking Financial Companies (NBFCs), where you can deposit a lump sum amount for a period ranging from 7 days to 10 years. A major advantage of a fixed deposit account is that the rate of interest is decided at the time of starting the FD, and it remains stable, regardless of market fluctuations.
The present interest rates for FDs fall between 3% and 7%, depending on the bank or the financial institution and the tenure of the deposit. Senior citizens usually receive 0.5% more interest than regular depositors.
Up to ₹1.5 lakhs can be claimed as deductions under Section 80C of the Income Tax Act, but the interest earned from FDs is fully taxable. Additionly, the Tax Deduction at Source (TDS) is applicable on interest income, if it exceeds ₹40,000 in a year (₹50,000 for senior citizens).
SCSS vs FD: The Takeaway
Comparing the two, SCSS offers a higher interest rate but also comes with age restrictions, whereas FD has a slightly lower interest rate but is available across all age groups with no maximum limit on the investment amount. The tax benefits are relatively similar for both. Additionally, the ease of operation and the accessibility of FDs offered by almost all banks and NBFCs makes it an equally lucrative option as SCSS.
For a senior citizen, looking at the perspective of securing their twilight years, both SCSS and Fixed Deposit India, depending on the individual investment goals and risk tolerance, could be a smart savings move.
However, irrespective of the chosen saving scheme, an investor must assess all the pros and cons of investing in the Indian financial market. While this comparison brings out the key benefits of both, the final decision should be based on careful consideration of several factors such as financial goals, risk appetite, and liquidity requirements.
Disclaimer:
The above information is for informational purposes only and does not constitute financial advice.
Summary:
In choosing between the Senior Citizen Saving Scheme (SCSS) and Fixed Deposits (FD), it is necessary to compare their interest rates and tax benefits. While SCSS has an interest rate of 7.4%, FD rates fall between 3% and 7% depending on the bank or financial institution involved. SCSS has an age restriction and a maximum limit of ₹15 lakh for investments, whereas FDs are open to all age groups with no upper limit for the investment amount. Tax benefits for both are roughly similar. While deciding between SCSS and FD, personal financial goals, risk appetite, and liquidity requirements should be factored in. It is admissible to remember that investing in any savings scheme in the Indian financial market comes with its own set of risks which should be measured before making a financial commitment.
