SCSS vs Senior Citizen FD: Which one is better for interest, tax, and security? Find out which scheme is best for post-retirement investment..
When regular income ceases, investments serve as a "monthly pension." Therefore, it's important to make a wise decision after retirement. Currently, two options are most discussed:
Senior Citizens Savings Scheme (SCSS)
Senior Citizen Fixed Deposit (FD)
Let's understand both in simple terms.
What is SCSS?
The Senior Citizens Savings Scheme (SCSS) is a special scheme of the Central Government, designed for people aged 60 years and above. Its key features:
Interest rate: 8.2% per annum (current)
Term: 5 years (3-year extension possible)
Maximum investment: ₹30 lakh
Interest payment: Every three months
Tax exemption up to ₹1.5 lakh under Section 80C
This scheme is fully guaranteed by the Government of India. Therefore, it is considered extremely safe.
What are the benefits of a Senior Citizen FD?
Senior Citizen FDs can be opened with any bank. They offer 0.25% to 0.75% higher interest rates than regular FDs. Some major banks offer interest rates around 7.10% for senior citizens. Small finance banks offer interest rates around 8%.
SCSS vs FD: Comparison at a Glance
Basic SCSS Senior FD
Interest Rate 8.2% (Fixed) 6.5%–8% (Depending on Bank)
Guarantee: Government of India DICGC Insurance up to ₹5 lakh
Term 5 years (3 years extension), 7 days to 10 years
Tax Benefits: 80C exemption only for 5-year tax FDs
Interest Payments: Quarterly/Monthly/Quarterly/Maturity
Where is the greater security?
Investments in SCSS are fully backed by the government. In FDs, DICGC insurance only covers up to ₹5 lakh. If a retired individual wants to invest ₹20-25 lakh, SCSS would be a relatively safe option.
Understand the tax math.
Investing in SCSS provides a tax deduction of up to ₹1.5 lakh under Section 80C. However, the interest is fully taxable.
Interest on FDs is also taxable. However, only 5-year tax-saving FDs are eligible for Section 80C benefits. This is not the case with other FDs.
Who should choose which?
SCSS is better if:
You are 60+
Want secure income for the long term
Need regular quarterly interest
Also want tax savings
FD is better if:
You need a flexible tenure
Want to withdraw money at any time
Want to invest in small installments
Have faith in a particular bank
Balance is wise
"Complete security" and "regular income" should be the top priorities when investing after retirement. SCSS appears to have a slight edge in this regard. But investing the entire amount in one place is not wise.
The best approach may be to invest a portion of the money in SCSS and the rest in FDs. This way, you'll have both security and flexibility.
What does this mean for you?
SCSS offers greater security and better returns, while FDs offer more flexibility. A balanced investment strategy, based on your expenses, age, and needs, is the right strategy.
Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
