5 disadvantages of investing in SCSS: Senior Citizen Financial savings Scheme (SCSS) is a government-backed financial savings scheme in India for senior residents. Any particular person above the age of 60 can make investments on this scheme, and earn the next rate of interest than financial institution fastened deposits (FDs). Whereas there are a number of benefits of investing in SCSS, senior residents also needs to know the disadvantages earlier than investing on this scheme.
Senior Citizen Financial savings Scheme (SCSS) newest rates of interest
Banks and put up places of work provide an rate of interest of 8.2% on the Senior Residents’ Financial savings Scheme (SCSS). The government had hiked the rate of interest for the April-June quarter from 8 per cent to eight.2 per cent. As soon as the funding is completed the rate of interest stays the identical all through the tenure.
Senior Citizen Financial savings Scheme (SCSS) funding restrict
Senior residents can make investments as much as ₹30 lakh on this scheme from April 1, up from ₹15 lakh earlier than, as said by Finance Minister Nirmala Sitharaman in her Funds 2023 presentation.
Vinit Khandare, CEO and Founder, MyFundBazaar listed out 5 disadvantages of investing in SCSS
1) TDS on SCSS curiosity
The curiosity from SCSS deposits turns into taxable if it surpasses the ₹50,000 cap in a monetary yr, in contrast to PPF schemes the place every thing is tax-free.
2) Mounted Curiosity Price
Whereas the SCSS account has develop into a really interesting funding alternative for senior residents because of the present rate of interest of 8.2%, people who created the account earlier at a lesser fee are at a drawback. They may shut their earlier SCSS account and begin a brand new one to reap the benefits of the current excessive fee. Nevertheless, there are charges related to prematurely canceling an SCSS account.
3) No curiosity on unclaimed curiosity earnings
Every quarter, homeowners of SCSS accounts should report their curiosity earnings. You will not obtain any additional curiosity on the cash if you happen to do not declare the curiosity that’s due every quarter.
4) Restricted Age Bracket
Solely seniors over 60 years previous are eligible to open a SCSS account. Workers within the non-public sector who need to retire early can’t reap the benefits of the programme.
5) Mounted Tenure
Investments made in SCSS accounts have a 5-year lock-in interval. A further three years might be added to the extension. Some depositors could discover it difficult to develop plans based mostly on their targets or for individuals who could need to speculate merely for a few years because of the lock-in time period. Because of the lock-in interval and the precise penalty for untimely withdrawal, sure buyers could probably expertise a liquidity disaster.
Disclaimer: The views and proposals made above are these of particular person analysts, and never of Mint. We advise buyers to test with licensed consultants earlier than taking any funding choices.