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Senior Citizen Savings Scheme: Here’s How You Can Calculate Your Returns

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For individuals over the age of 60, the Senior Citizen Savings Scheme (SCSS) is a suitable fixed income investment plan. By investing in this scheme senior citizens can generate a steady stream of income after they retire. Because SCSS is a government-backed scheme just like other small saving schemes of post office, it offers quarterly assured returns. To open an SCSS account one can make a minimum contribution of Rs 1,000 up to a limit of Rs.15 lakh. Under section 80C of the Income Tax Act, 1961, the principal amount deposited in SCSS is subject to tax deduction of up to Rs. 1.5 lakh per year. The interest rate on the Senior Citizen Savings Scheme (SCSS) for the first quarter (April-June) of FY 2021-22 is capped at 7.4 percent per annum. The interest is paid to the account holders quarterly under SCSS. Every fiscal year, interest will be credited on the first day of April, July, October, and January. After 5 years from the date of account opening, a Senior Citizen Savings Scheme matures. After the account has matured, the account holder has the option of extending it for another three years. Here's the formula to calculate how much quarterly interest you will get across the maturity period.

 

SCSS Fixed Income Calculation

SCSS Fixed Income Calculation

The interest rate provided under the Senior Citizen Savings Scheme is adjusted every quarter. The interest rate announced at the time of investment stays unchanged for the term of the maturity period and is unaffected by changes in the upcoming quarter. For instance Mr. A has deposited Rs 1 lakh in SCSS on December, 2020 and recently in March 2021 the government has kept the interest rate unchanged i.e. 7.4% for the three months ending June 30, 2021. Hence, your deposit will earn the same interest rate throughout the maturity period of 5 years even if it is revised in the later quarter.

SCSS premature withdrawal and account closure calculation
 

SCSS premature withdrawal and account closure calculation

One year after the account is opened, a person can withdraw money from his or her SCSS account. One year after the account is opened, a person can withdraw money from their Senior Citizen Savings Scheme account. If the account is closed within one year, no interest will be paid, and all interest paid will be deducted from the principal. If the account is closed after one year but within two years from the date of opening, 1.5 percent of the principal will be deducted. If the account is closed after two years but within five years from the date of opening, 1% of the principal will be withheld as a penalty. For instance: Mr A has opened an SCSS account on 1st February 2018 and deposited Rs 1 lakh. But unfortunately he closed the account on 6th January 2020, then he will be charged a penalty of Rs 1,500.

Quarterly disbursal calculation

Quarterly disbursal calculation

The Senior Citizen Savings Scheme provides a quarterly payout option for the account holders. Which means that account holders will get the interest payment on a quarterly basis. For instance: Mr A deposits Rs 5 lakh then he will get a quarterly payout of Rs 9,250.

Rs {(5,00,000 x 7.4% x 5) / 20} = Rs 9,250.

As a result, Mr. A will receive roughly Rs. 9,250 as interest over the period of 20 quarters.

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