Winning Bizness Desk
Mumbai.SCSS offers senior citizens regular income at 8.2% interest, with quarterly payouts and five-year maturity period
If you are a senior citizen looking for a regular income stream after retirement, the Post Office Senior Citizens’ Savings Scheme (SCSS) can provide a relatively safe option for deploying a lump-sum corpus. The government-backed scheme offers 8.2% annual interest and pays the interest every quarter, making it suitable for retirees seeking predictable cash flow.
The scheme is designed to protect retirement savings while generating regular income. With an investment of up to ₹30 lakh, an investor can earn ₹2.46 lakh in interest every year at the current rate. This translates into ₹61,500 every three months, which is credited to the investor’s savings account at the post office.
Investment limit and quarterly income explained
An SCSS account can be opened with a minimum investment of ₹1,000, while the maximum investment allowed is ₹30 lakh. At an annual interest rate of 8.2%, the income from the maximum investment works out as follows:
- Investment: ₹30 lakh
- Annual interest: ₹2.46 lakh
- Quarterly interest: ₹61,500
- Interest rate: 8.2% per annum
The interest is credited on April 1, July 1, October 1 and January 1. It is transferred to the savings account held at the same post office. If the account holder does not withdraw the interest, it does not earn additional interest or compound further.
Five-year maturity with extension option available
The maturity period under SCSS is five years. An account can, however, be closed before maturity, subject to the applicable penalty. After the initial five-year period, the account can be extended in blocks of three years as many times as the investor chooses.
At the end of the maturity period, investors who do not wish to extend the account can withdraw their original investment of ₹30 lakh.
Tax benefit available under Section 80C
Investment in the scheme is eligible for a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. In simple terms, eligible investors can reduce their taxable income by up to ₹1.5 lakh through this deduction.
However, the interest earned under the scheme is paid separately on a quarterly basis and does not receive any additional compounding if it remains unwithdrawn.
Who can open an SCSS account?
The scheme is primarily meant for senior citizens aged 60 years or above. Certain people who retire before turning 60 can also qualify, subject to specific conditions.
- A person who has taken voluntary retirement (VRS) and is above 55 but below 60 can open an account.
- Retired defence personnel above 50 but below 60 can also invest.
- In the case of eligible defence retirees, the investment must be made within one month of retirement.
For an investor putting ₹30 lakh into SCSS, the annual interest at 8.2% is ₹2.46 lakh. Over five years, the total interest works out to ₹12.30 lakh if it is not withdrawn. Thus, the original ₹30 lakh plus five years’ interest would amount to about ₹42.30 lakh, although the unpaid interest itself does not compound.
