Senior Citizen Savings Scheme Interest Calculation: Not everyone in India has access to a fixed monthly pension. However, post-retirement, having a minimum monthly cash flow is important to meet daily needs. The government’s Senior Citizen Savings Scheme (SCSS) can make this possible. The scheme currently provides 7.4% annual interest (quarterly interest of Rs 185 on a Rs 10,000 deposit). There is a maximum deposit limit of Rs 15 lakh under SCSS.
The scheme allows a senior citizen to open the SCSS account in an individual capacity or jointly with the spouse. In the case of a joint account, the deposit is attributed to the first account holder only. However, both spouses can open separate SCSS accounts and deposit up to Rs 15 lakh each in their accounts respectively.
“Both the Spouses can open individual and/or joint accounts with each other with the maximum deposits up to Rs.15 Lakh each, provided both are individually eligible to invest under relevant provisions of the rules governing the scheme,” the SBI website says.
So a senior citizen couple can open separate SCSS accounts with Rs 15 lakh deposit in their respective accounts. Here’s a look at the returns both can get by depositing Rs 15 lakh each in their SCSS accounts.
SCSS Calculation: How much return is possible?
As per SCSS rules, interest is payable quarterly.
|Principal Amount||Rs 15,00,000|
|No. of years||5|
|Quarterly interest||Rs 27,750|
|Annual Interest||Rs 1,11,000|
|Total Interest in 5 years||Rs 5,55,000|
A deposit of Rs 15 lakh would fetch a quarterly interest of Rs 27,750 at the current rate of 7.4% interest. The annual interest would be Rs 27,750 x 4 = Rs 111,000.
The combined annual interest earned by the senior citizen couple from both their respective SCSS accounts would be Rs 111,000×2 = Rs 222,000. Having said that, there are a few more important points you should know about SCSS:
- The maturity period for SCSS deposits is 5 years. The accountholders should claim the quarterly interest as it doesn’t earn any interest if not claimed.
- SCSS interest can be auto-credited to the savings account.
- The interest is payable quarterly and becomes applicable from the date of deposits to 31st March/30th June/30th September/31st December.
- Investment under the SCSS scheme qualifies for deduction under Section 80C of the Income Tax Act.
- If the total interest on all SCSS accounts exceeds Rs 50,000 in a financial year then TDS is levied at the prescribed rate. However, no TDS is deducted on submission of 15 G/15H, and if the accrued interest is not above the prescribed limit.
- SCSS account can be extended for another three years after the mandatory 5 year maturity period. The original principal amount is returned to the account holders after maturity. They can use this money to open new SCSS accounts.