FD vs SCSS: How much will you earn annually by investing ₹10 lakh? Understand the full calculation..

FD vs. SCSS: Regular income is a primary need after retirement. Fixed Deposits (FD) and the Senior Citizen Savings Scheme (SCSS) are two popular options for senior citizens. Both offer capital safety and interest earnings, though they differ in interest rates and payout methods.

Currently, the SCSS offers an annual interest rate of 8.2%, whereas SBI offers senior citizens 7.05% interest on 5-year FDs (rates may vary by bank). Consequently, the difference in earnings between the two options on an investment of ₹10 lakh is clearly visible.

How much is earned on ₹10 lakh in SCSS?

Investing ₹10 lakh in SCSS at an 8.2% rate generates ₹82,000 in annual interest. Payouts are made quarterly, meaning one receives approximately ₹20,500 every three months.

Thus, the total annual interest amounts to ₹82,000, while the principal investment of ₹10 lakh remains intact. The SCSS tenure is 5 years, though it can be extended subject to rules.

How much interest is earned on ₹10 lakh in an FD?

SBI offers senior citizens 7.05% interest on 5-year FDs. At this rate, the annual interest on ₹10 lakh would be approximately ₹70,500.

This means that for the same ₹10 lakh investment, an FD yields about ₹11,500 less in annual interest compared to the SCSS. However, FD rates can vary depending on the bank and the tenure.

Investment | Interest Rate | Annual Interest on ₹10 Lakh | Payout
--- | --- | --- | ---
SCSS | 8.20% | ₹82,000 | Quarterly
SBI Senior Citizen FD | 7.05% | ₹70,500 | Varies by bank
Difference | 1.15% | ₹11,500 | Higher in SCSS

Consider the tax aspect too.

An investment of ₹10 lakh yields ₹82,000 in annual interest from SCSS and ₹70,500 from the SBI Senior Citizen FD. If an investor falls under the 20% tax slab, the tax deduction on SCSS—including the 4% cess—would be approximately ₹17,056. In contrast, the tax payable on an FD would be around ₹14,664. Consequently, the net interest income after tax would be approximately ₹64,944 for SCSS and ₹55,836 for the FD.

The government determines the SCSS interest rate on a quarterly basis; therefore, the current rate of 8.2% is subject to change in the future. Similarly, FD interest rates vary depending on the bank and the investment tenure.

Which option yields more on an investment of ₹10 lakh?

Based on current rates, an investment of ₹10 lakh generates an annual interest of ₹82,000 through SCSS and approximately ₹70,500 through an SBI Senior Citizen FD, resulting in an annual difference of ₹11,500.

However, the decision should not be based solely on the interest rate. It is also important to consider factors such as the investment tenure, the need for regular income, liquidity, and tax implications.

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