Retirement planning is among the most essential part of financial planning to do in your 30s and 40s so that once you decide to retire, you will be left with sufficient amounts for sustenance.
In India, Senior Citizens Savings Schemes offer benefits like higher interest rates of 0.5 per cent. Also, Senior Citizens who own business and may not have business income are exempted from paying advance tax.
Senior Citizen Savings Scheme is specially designed to benefit senior citizens and provides a decent interest rate of 9 per cent. As per rules, NRI's and HUF are not eligible to open an account under the scheme. The lock in period is 5 years and can be extended up to another 3 years.
Now let us look at best Senior Citizen Savings Scheme in India
Senior Citizen Savings Scheme From SBI
Individuals who have attained the age of 60 years are eligible to open an account and can be done by submitting an an application in Form A along with the amount of deposit in multiple of Rs 1000, along with age proof.
In a case when an individual has attained the age of 55 years but less than 60 years can also open the account if the retirement is on account of superannuation or otherwise.
While, the account holder can open more than one, it is important to remember that total of all the investment in all of the Senior Citizens Savings Scheme have been capped at Rs 15 lakh.
One can withdraw the sum after a period of one year from the date of opening the account, but, there is a penalty that is levied.
The deposit made under the Scheme will attract an interest of 8.6 per cent per annum from the date of deposit. Interest is payable at the end of each calendar quarter March 31, June 30, Sept 30 and December 31 of each year. It's also important to note that under the scheme there is no compounding of interest, as happens in the case of bank deposits.Maturity: After completion of the time frame of five years from the account opening date, proceeds would be made on producing the account passbook along with a written application, Form E.
On death of the accountholder: Amount shall be closed and the deposit amount shall be refunded to the nominee or legal heir in Form F application form.
Senior Citizen Savings Scheme from ICICI Bank
ICICI Bank is the only private sector bank which is authorized to open accounts under the Senior Citizen Savings Scheme.
There is no income tax or wealth tax rebate that is applicable under the Scheme. Tax rates will be applicable as per income earned by the individuals.
The withdrawal restrictions are the same across all banks as the scheme is standardized. Closing after one year but before the expiry of two years, an amount equal to one and a half per cent of the deposit shall be deducted. For withdrawals made after completion of two years, the amount equivalent to 1% of the balance amount in the saving scheme shall be deducted. You need to check the penalty with individual banks.
The deposits bear an interest rate at 8.4 per cent and will be decided by the government every year. TDS shall be applicable.
Interest is payable at the end of each calendar quarter March 31, June 30, Sept 30 and December 31 of each year.
Extension to a further period of three years can be made upon application.
Senior Citizen Deposit Scheme from Post Office
The Post Office like banks also offer the scheme. Individual who have attained 55 years or more but less than 60 years can open an account subject. One important thing to note in the case of the post office is that the account must be opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
Premature closure is allowed after one year on the deduction of an amount equal to 1.5 per cent of the deposit & after 2 years 1 per cent of the deposit.
Currently, interest rates are capped at8.4 per cent per annum, payable from the date of deposit and are made payable on March 31, June 30, Sept 30 and Dec 31 each year.
Note that only, investment in post office will qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1.4.2007.
So, of the three entities offering the SCSS, SBI is offering a higher interest rate. And one can choose between these three options (one from the public sector bank, private bank and last one from the post office) based on the service and flexibility, as the higher interest rate by some percentage shall not make a major change in returns. As this scheme is offered from the government, the features and benefits will more or less be same.