Senior citizens want their freedom after retirement to be secured. They seek to have a monthly income for their investment. Bank fixed deposits (FDs) and the Senior Citizen Savings Scheme (SCSS) are the ideal investment opportunities, keeping the long-term stability aspect and added additional benefits in consideration. The State Bank of India (SBI) has recently announced the extension of the SBI 'WECARE' Senior Citizens' Term Deposit Scheme for elderly people by March 31, 2021. Let's compare the both schemes i.e. SBI Senior Citizen FD and Senior Citizen Savings Scheme and make a final investment decision for senior citizens.
The Senior Citizen Savings Scheme currently provides an annual interest rate of 7.4%, which is the highest interest rate among India's numerous small savings schemes. But when it comes to the SBI We Care Scheme, senior citizens will get returns of 6.20% against their deposits. Hence, this special FD scheme by SBI will provide additional interest i.e. 30 bps to seniors.
Individuals over the age of 60 years can invest in Senior Citizens Savings Scheme (SCSS). Under this scheme the maturity period is 5 years, and they are also allowed to extend their account to a block of 3 years. Whereas the SBI We Care scheme comes with a tenure of 5 Years & above.
An individual over 60 years of age can invest in Senior Citizen Savings Scheme and SBI Special FD scheme. Senior Citizen Savings Scheme is accessible via banks throughout the public, private sector, and even post offices in India. As a government-backed investment scheme, independent of the bank/post office in which you deposit, the terms and conditions relevant to the SCSS are the same. The SBI Wecare Deposit applies only to senior citizens who are the customers of SBI.
Premature withdrawal facility
Under the Senior Citizen's Savings Scheme the subscribers are allowed to make a premature withdrawal but penalties are applied which are as follows:
If an exit from the scheme is made before the expiration of 2 years from the date of account opening, 1.5 percent of the deposit balance is withheld as a penalty.
If an exit from the scheme falls between 2 years and less than 5 years from the date of account opening, 1 percent of the SCSS balance is deducted as a penalty.
Whereas SBI special FD scheme also allows senior citizens to make a premature withdrawal but by paying a penalty of 0.5% and also the additional premium of 30 bps not payable to them.
There are no tax benefits provided by the SBI Wecare scheme. Deposits under the SCSS scheme, on the other side, count for the tax benefit under the Section 80C of the Income Tax Act.
Senior Citizen Savings Scheme is a secure investment choice open to senior citizens that offers higher interest rates and tax benefits opposed to SBI special FD. Generally speaking, before making any investment decisions, investors should consider all other factors too apart from interest rates.