Senior Citizens Savings Scheme

Income tax benefits on Senior Citizens Savings Scheme

  • Senior Citizens Savings Scheme currently offers an interest rate of 8.6%
  • Senior citizens can deposit a maximum of ₹15 lakh and earn quarterly interest

This 5-year, small savings scheme offers currently offers an interest rate of 8.6% per annum. Under this scheme, senior citizens can deposit a maximum of ₹15 lakh and earn quarterly interest. But the interest earned is taxable. The government can provide tax exemption to Senior Citizens Savings Scheme (SCSS) to support the senior citizens. This move will have a minimal impact on fiscal deficit of 2 basis points.

Senior citizens can deposit a maximum of ₹15 lakh and earn quarterly interest:

Government has an excellent scheme for senior citizens. The interest on SCSS is fully taxable which is a major drawback of this scheme,” it added in the report.  The impact of declining interest rate regime since 2015 is also being felt by the depositors / pensioners.  In a country with less than 5% of the population having access to social security. The bank depositors are at least compensated with a sufficient positive real rate of return and are treated at par with the borrowers too. There are more than 4 crore pensioners who have average term deposits of 3.34 lakh per account. The net impact on Private Final Consumption Expenditure due to low interest income could be a decline of 30 basis points.

TDS is deducted at source on interest from Senior Citizen Savings Scheme if the interest amount is more than ₹10,000 per annum. Investment under this scheme however qualifies for the benefit of Section 80C of the Income Tax Act, 1961. Under Section 80TTB, senior citizens can claim deduction up to ₹50,000 on interest earned from deposits.

Fixed deposits are often preferred investment options for senior citizens because they provide a higher interest rate and tax benefits. All the top lenders including the State Bank of India(SBI) , ICICI Bank , HDFC Bank, and others give 50 basis points interest to senior citizens over and above the general customers. The banks have been reducing interest rates in tandem with RBI’s decision to cut its repo rate.

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