SCSS vs Senior Citizen Fixed Deposit: Check interest rate, tax deduction, eligibility, tenure
Safety of capital, guaranteed interest income and higher interest rates from other depositors make bank fixed deposits (FDs) a preferred investment instrument for senior citizens, especially for retired individuals lacking other sources of income. Another fixed income instrument that has gained significant traction among senior citizens in recent years, especially during the low interest regime of Covid years, is Senior Citizens Saving Scheme (SCSS). The net corpus of this scheme has grown from Rs 73,728 crore in February 2020 to about Rs 1.17 lakh crore in February 2022.
As the interest rate of SCSS continues to beat senior citizen FD rates offered by most banks for the 5-year tenure, here I will compare the various features of SCSS and bank FDs to help you make an optimal choice.
SCSS offers an interest rate of 8.2% p.a., which is around 50-150 bps higher than FD rates offered by PSU banks and large private sector banks, to senior citizens for 5-year tenure. Only a couple of banks like Suryoday Bank, Unity Bank, DCB Bank and Fincare Bank offer higher FD interest rates for their 5-year tenure. The story remains the same for tax-saving FDs, which too qualify for tax deduction under Section 80C and have a tenure of 5 years or more. Thus, when it comes to interest rates, SCSS clearly beats the FD rates of most banks by a significant margin.
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Investment in SCSS of up to Rs 1.5 lakh per financial year qualifies for tax deduction under Section 80C. Among the bank FD variants, only the tax saving FDs with a lock-in period of 5 years qualify for tax deduction under Section 80C. The interest income earned from tax saving FDs is taxable as per tax slab of
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