The Government of India has started a saving scheme for senior citizens, which also doubles as a tax-saving scheme.
Tax Benefits of the Senior Citizens’ Savings Scheme:
Deduction of up to ₹1,50,000, under Section 80C, is applicable on these deposits. However, any interest earned on this deposit is completely taxable. TDS (Tax Deducted at Source) is applicable if the interest earned on these deposits is more than ₹50,000 in a fiscal year. This deduction limit is applicable from Assessment Yes 2020-2021 onwards.
Apart from its tax deduction benefits, the Senior Citizen’s Savings Scheme has the following characteristics:
- Since these deposits are offered by the Government of India, they carry a supreme guarantee.
- The maturity of these deposits is 5 years, which can be further extended for another 3 years, from the date of opening the account. The rate of interest offered is quite high at 8.6% (The interest rates are revised on a quarterly basis. These rates apply to the Oct-Dec 2019 quarter).
- Deposits can be made through post offices, public sector banks. Some specific private bank(s) can open these accounts. This scheme has a minimum deposit limit of ₹1,000 and a maximum limit of ₹15 Lakhs or the actual sum received at the time of retirement, whichever is lower.
- No penalties are charged for early closure in case of the death of the account holder.
Eligibility for senior citizens savings scheme
- Only Indian nationals of 60 years or over can open and apply for this scheme.
- Indian nationals of age 56 can also apply, provided they have superannuation retirement or have opted for voluntary retirement scheme (VRS) or special retirement scheme. In such cases, the account should be opened within a month of receiving the benefits of retirement.
- Retired Defence personnel can take benefit of this scheme without age bar, but have to meet some specific conditions.
Early or premature Withdrawal
- The penalty is applicable on early or premature withdrawal under this scheme.
- Premature withdrawals can be made after a minimum period of 1 year.
- If you choose to close the account after the first year, but before the end of the second, 1.5% of the deposit amount is charged as premature withdrawal charges.
- For closure after 2 years, 1% of the deposit amount is deducted as a penalty.
Conclusion This scheme floated by the Government of India, offers a high rate of interest, with assured sovereign security of deposit monies compared to fixed deposits.