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Why Senior Citizen Saving Scheme Better Than FD? Research Team | Posted On Saturday, October 06,2018, 06:38 PM

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Why Senior Citizen Saving Scheme Better Than FD?



You work hard throughout your life, to enjoy a relaxed and comfortable retirement. Senior citizens will often look for safe investment options, which offer good interest rates and generate enough income to sustain a quality lifestyle. To match inflation, you need to look at sources of income that minimizes tax outflow. Surely, no one wants to outlive their wealth.

For senior citizens, it is always advisable to deposit savings in an account that ensures safety, avoids loss of capital, minimizes tax outflow as well as generates regular income. One such scheme is the senior citizens saving scheme (SCSS).

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Why Senior Citizen Saving Scheme Better Than FD?

What is senior citizens saving scheme?

The senior citizens savings scheme (SCSS) is a popular small saving scheme that offer retirees with a regular and risk free tax saving investment. It is an effective and long term saving option that offers capital protection along with quarterly interest payments as a source of regular income. The scheme is backed by the government and offers a sovereign guarantee. Investing in SCSS is a good way to reduce the gap between pension and a regular salary.

What is a fixed deposit?

Fixed deposit is an investment instrument where you can deposit money for a higher rate of interest vis-a-vis savings account. The deposit can be made for a period of 7 days to 10 years. Once the money is invested, it starts earning interest till maturity. One of the main criteria of fixed deposits is the money cannot be withdrawn before maturity. If withdrawn before maturity, the deposit is liable to a small penalty.

SEE ALSO: Atal Pension Yojana


People post retirement, look for avenues to generate more income from savings. This is one primary reason for retirees to invest in SCSS. Other than elements of safety, SCSS pays higher interest than fixed deposits. While SCSS can fetch 8.7% a year on your deposit, an FD for a senior citizen will give around 7-7.5%.

Investing in SCSS is a good option, as interest is paid in quarterly cycles. You will have a monthly income as well as the principal will be returned at the end of tenure. An FD earns interest which can be encashed only after maturity.

Documents required for opening SCSS

An individual applying to this scheme, must be 60 years or older. Early retirees between 55 to 60 years who opted for voluntary retirement can invest in this scheme within a month of retirement. You require:

1. Age proof

2. Senior citizen card

3. Voter ID card

4. Pan Card

5. Ration card

6. Birth Certificate

7. Driving license

Documents required for Fixed Deposits:

You need to be an Indian resident and above 18 years to open a fixed deposit.

1. Pan card

2. Voter card

3. Driving license

4. Ration card

5. Age proof

6. Passport

7. Telephone bill

8. Electricity bill


Senior citizen saving scheme eligibility:

There are certain eligibility criteria to invest in this scheme. You should keep the following points in mind before applying to this scheme:

 1.  An investor must attain the age of 60 years or above to invest in this scheme.

2. An individual who opted for voluntary retirement scheme (VRS) or superannuation can also invest in this scheme.

3. Retired armed force personnel who are 50 years of age or above can also apply to this scheme.

4. HUFs and NRIs are not allowed to invest in the scheme.

Fixed deposit eligibility:

1. Any individual who is a Resident of India can open an account using a valid identity proof.

2. Hindu undivided family can open an account using valid identity proof of the person operating the account.

3. Fixed deposit accounts can be opened by trusts, companies, partnership firms, associations, clubs and societies, through joint as well as single accounts and operate them in the name of the company, trust or association.

It is always advisable for retirees to invest in senior citizen saving schemes rather than fixed deposits, as these accounts ensure higher returns than fixed deposits. As these deposits are meant to benefit senior citizens, they come with a host of special benefits and privileges.

Tax benefits and withdrawals:

Tax and withdrawal benefits on SCSS:

Investment in SCSS qualifies for tax deductions under Section 80C of the income tax act. The benefit can be claimed for the year in which the deposit was made. The interest earned on SCSS is exempt up to Rs 50,000 a year; the rest will be deducted at source by the bank/post office as per rule.

It must be noted that there are no tax benefits in case of premature withdrawal from the scheme. The principal amount withdrawn along with the interest paid is considered a source of income in the financial year of premature withdrawal. No tax will be deducted in case of premature withdrawal by the nominee in the event of death of the subscriber.

Tax and withdrawal benefits on fixed deposits:

Investing in a 5 year tax saver FD qualifies for a tax deduction under Section 80C of the income tax act. An investor can claim a tax deduction up to a maximum of Rs 1.5 Lakhs a year by investing in tax saver fixed deposits. The interest earned on fixed deposits is liable to tax.  Money saved on these deposits is safe and can be redeemed with the interest earned once it reaches maturity.

Interest rate on SCSS VS FD:

The interest rate offered on senior citizen saving scheme is 8.7% whereas fixed deposit offer interest rates that ranges between 6.5-7.5%. As retirees will want to generate more income on their investment, investing in SCSS makes more sense. SCSS enables them to receive regular income to cover monthly expenses.

Other facilities on SCSS:

Mode of payment:

Deposits can be made in cash if the amount is less than Rs 1 Lakh or through cheque or demand draft if the amount is higher.

Number of accounts:

There is no limit on the number of accounts an individual can hold. You can opt for more than one account; however the total deposit should not exceed the maximum investment limit of Rs 15 lakhs.


A depositor needs to appoint a nominee at the time of opening the account. The depositor can also opt for joint account. In that case the nomination form should be signed by all the account holders. A depositor can also appoint a minor as his nominee. However, he needs to provide guardian details along with the minor’s date of birth.


In the senior citizen investment scheme, an individual through joint or single account can invest up to Rs 15 lakhs. It is important that the money invested should not exceed the amount of money an individual receives at the time of retirement. Therefore, an individual can invest either Rs 15 Lakh or the amount of money received during retirement, whichever is lower.


The senior citizen saving scheme allows the individual to extend the account for another 3 years on maturity of 5 years. The application for renewal needs to be sent within a year of the date of maturity.

Closure of account:

The SCSS account can be closed at the time of maturity by producing passbook and closure form. In case of an untimely death of the depositor before maturity, the account shall be closed and the deposit along with the interest will be paid to the nominee. If a nominee is not appointed, then the amount will be handed over to the legal heir.

Account transfer:

This scheme enables the individual to transfer his/her account from one bank to another. This facility can be availed by submitting the correctly filled transfer form from the current branch to the other, by paying a nominal fee.

SCSS is a promising investment scheme for the senior citizens or retirees introduced by the government. Hence it is a secure and risk free investment avenue. However it must be noted, while opening an SCSS account the documents submitted must be legitimate. In case the information is found to be false or incorrect, the account will be closed immediately. The interest earned will be deducted and only the principal amount returned.

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