If your father has retired or is about to retire, he must be
wondering where his money should be deposited. The Senior
Citizen Saving Scheme (SCSS) is the most straightforward investment vehicle
available for retirees among all the options. Because of the benefits it
offers, many retirees would like to write an INR 15 lakh cheque early. Here are
a few points that all retirees should note before writing a cheque.
Eligibility
An individual who is above the age of 60 can go for SCSS
scheme. Any individual who has opted for a voluntary retirement scheme or
retired from 55 to 60 years of age group may opt for this scheme within one
month of retirement. The age limit was reduced to 50 years or more for defence
personnel.
In all accounts put together, a person may operate more than
one account individually or jointly, subject to the INR 15 lakh deposit cap.
Only spouses are allowed to hold a joint account. An individual cannot join his
son or daughter for opening a can account.
Regular income
The scheme pays interest at a rate of 8.3 per cent annually.
Assured bonus at the end of every quarter is the scheme's biggest attraction.
Interest rates are subject to revision per quarter. The interest charged by the
programme is taxable in the investor's hands depending on the income tax rate.
If the person collects pension or some other annuity from his employer or an
insurer, and interest on other bonds and fixed deposits, whether he opts for
this scheme, he will see an increase in income. This is particularly true of
pensionable government employees.
If the investor is
healthy and has adequate pension income, then regular pay may not be needed. In
that case, depending on their risk appetite, the retiree may want to consider
other investment options, such as bond funds and non-convertible debentures.
Tax benefits
Under section 80C of the Income Tax Act, contributions up to
Rs 1.5 lakh are eligible for deduction. Therefore, if you carefully plan your
savings, you can also plan your taxes.
Penalty for premature withdrawal
Since the duration of the deposit is for five years,
creditors must take a long-term view. The same cannot be said in old age,
however. There are cases like planned operations, relocation expenses or house
renovations.
In such a case, he/she will face penalty charges if one
tries to withdraw the proceeds. Withdrawals are only permitted after one year.
If one decides to withdraw after a year, but before two years, the retiree will
have to forgive 1.5 per cent of the amount withdrawn. In the scenario of
withdrawal after two years, the punitive penalties are a percentage of the
withdrawn number. If one decides to follow the phased investment strategy as
mentioned above, the retiree will see an annual maturing sum. In that case, at
least the expected expenditures can be handled better.
