“Retirement is when you stop living at work and start working at living.”
A frequent question in the minds of people today is: Do I have enough funds to retire? What will I do when I retire?
The whole point of getting high degrees, building a decent career, aiming for high salaries, saving incomes, making a wise investment and various other activities in our life are done with the intention to have a peaceful lifestyle once we retire.
We commonly hear our parents say, “I don’t want to be dependent on my children when I retire” or “I want to go on a European trip when I retire” and many such aspirations. Some have financial desires and some just want to be financially independent rather than being a burden to anyone.
Besides, retirement is a stage everybody goes through in their life, be it a government or a non-government employee.
To provide for all these needs, it is genuine that retired or senior citizens wish for post-retirement income. This is when small saving schemes provided by the Government of India becomes absolutely necessary.
One such Scheme is:
“Senior Citizen Savings Scheme”.
The Senior Citizens Savings Scheme (SCSS) is a scheme protected and backed by the Government of India to provide regular income for senior citizens of India. Since it is provided by the Government, this scheme is a risk-free tax saving investment, which is generally preferred amongst the retired audience.
“National Pension System (NPS)”
The National Pension System (NPS) is yet another instrument provided by the Government of India, with the intention to provide pension opportunity to every Indian and to inculcate the habit of saving especially for retirement.
This article aims at answering a few typical questions that senior citizens would have about SCSS and why one should consider NPS as a better option.
Who can invest in these instruments?
- One has to be a citizen of India to be eligible for SCSS.
- Must fulfill any one of the below age criteria:
a). Senior citizen aged 60 years or above.
b). Retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation with the age between 55-60.
c). Retired defense personnel with a minimum age of 50 years.
Note: HUFs and NRIs are not allowed to invest in this scheme.
With NPS, the criteria are simple: Any person between the age of 18 – 65 years can open an NPS account.
What should my investment amount be?
- The minimum amount required for an investment in SCSS is Rs.1000.
- The maximum amount should be the lower of the two:
- An individual can invest up to 15 lakhs
- An individual can invest the amount received as a retirement benefit.
If it’s a joint account with a spouse, then the maximum amount is 30 lakhs.
The investment amount of NPS varies between 500 to 1000, depending on the type of NPS (Tier 1 or Tier II) you belong to. And there is no upper limit to the amount you can invest in NPS. Read More on: Types of NPS options?
The investment should be done by cheque or cash?
The SCSS account can be opened by cash or cheque. In the case of cash, the amount is below Rs.1 lakh and by cheque, the amount is above Rs.1 lakh.
You can invest in NPS within minutes using the paperless process of Fisdom . All you need is to key in information with the amount you can invest and Fisdom shows you the top recommended funds.
What is the tenure of my investment?
The tenure for SCSS is 5 years. However, an extension of another 3 years is permitted.
An extension of three years is possible only on completion of the 5-year tenure. In addition, the investor needs to submit the duly filled Form B, which is regarding the extension of the scheme.
Note: Only one extension is allowed. But after one year, extended accounts can be closed and there would be no penalties charged for it.
With NPS, there is of fixed maturity tenure and one can contribute to the account till the age of 70.
When can I withdraw my money?
The ideal withdrawal of funds for SCSS is after the tenure of the investment. However, premature withdrawal can be done but is subjected to penalties.
The penalty varies based on the period of the investment.
- If the withdrawal is after the first year and before the end of the second year, then 1.5 % of the amount deposited is deducted as penalty.
- If the withdrawal is on or after the second year, then 1% of the deposited amount is deducted.
NPS allows withdrawal only after 3 years of subscription and the account holder can make withdrawals up to 25% of the contributions. NPS has two types of account Tier I and Tier II, wherein:
- Tier II account works like a savings account and hence the account holder is free to do withdrawals anytime.
- Tier I has not withdrawal option until the account holder turns 60 except for specific situations like critical illness, child’s marriage and construction/ purchase of a property.
What are the Interest rates on my account?
The above table provides the historic interest rates on SCSS. The government has decided to review these rates quarterly and the interest is paid on the last working day of April, July, October, and January.
With NPS, there are chances of making high returns as the scheme invests a certain amount in equities as well, so investors are capable of receiving interest rates as high as 12 – 14%, which is more than the interest rates provided by other savings schemes.
Can I have multiple accounts?
The answer is Yes for SCSS. One can have an individual account, Joint account with spouse and hold multiple accounts. Though the answer is No for NPS, the point is, there is no necessity to open multiple or a second account with NPS as it is portable across locations and sectors.
What are the tax implications?
As mentioned before, SCSS is a tax saving scheme.
- The sum invested on or after April 1, 2007, is eligible for tax deductions up to 1.5 per annum under 80C of the Income Tax Act.
- The interest earned is fully taxable.
- Tax is Deducted at source if interest is more than 10,000 per annum.
For NPS:
- With NPS you can save tax up to 1.5 lakhs every year under Section 80(CCD).
- You receive an additional tax deduction of Rs. 50,000 p.a. under Section 80CCD(1B) to save Rs. 15,480 in taxes!
- Starting 1st of April this year, NPS on withdrawal will be totally tax exempt (like PPF and EPF, but with better returns thanks to equity exposure).
How do I Open an Account?
One has to opt for a bank to open an SCSS account after which you would have to open a Savings bank account. You would require the following documents:
- Two passport size photographs
- Aadhar card. (Absence of which one must provide a copy of the acknowledged Aadhar card application)
- Address and identity proof such as PAN, Aadhar card, passport or declaration is Form 60 or 61.
- Fill the “account opening form” provided by the bank.
Note: Have your original identity proof for verification purpose.
For NPS:
- You can visit a point of presence (PoP), fill the prescribed form and submit the KYC documents.
- You can also do it online at enps.nsdl.com.
- Or simple, do it easily on your phone with Fisdom app and experience the paperless KYC process by just sitting at home.
Is Nomination facility available?
Yes, the facility is available for SCSS by submitting an application as part of Form C, accompanied by the passbook of the Branch, at the time of opening an SCSS account.
NPS also provides the facility of nomination.
But in which bank do I open the account?
The SCSS account can be opened at any head post office or general post office.
The banks which offer SCSS are Allahabad Bank, Andhra Bank, Bank of Maharashtra, Bank of Baroda, Bank of India, Corporation Bank, Canara Bank, Central Bank of India, Dena Bank, IDBI Bank, Indian Bank, Indian Overseas Bank, Punjab National Bank, State Bank of India, Syndicate Bank, UCO Bank, Union Bank of India and Vijaya Bank.
The only private bank to offer SCSS is ICICI Bank. List of Pension Fund Managers for NPS are:
- Birla Sun Life Pension Scheme.
- HDFC Pension Fund.
- ICICI Prudential Pension Fund.
- Kotak Pension Fund.
- LIC Pension Fund.
- Reliance Capital Pension Fund.
- SBI Pension Fund.
- UTI Retirement Solutions.
Also, like SCSS, NPS account can also be opened through several banks as mentioned above. But why do it yourself when an app can do it for you? Fisdom – India’s first and only app provides the facility of NPS for its investors. All you need is a few minutes to complete the paperless KYC process and then follow the steps below, you are all set to begin your retirement journey with NPS on Fisdom .
To sum it all up, the very objective of these Government Initiatives is to protect senior citizens from risks, cover their needs by means of assured returns.
It’s clearly seen that NPS can provide all the features that the Senior Citizen Savings Scheme can provide. Also additionally, it has tax benefits, way higher returns than usual retirement options and you can get it done easily with Fisdom .
Everyone deserves a peaceful retired life after working so hard. Let your investments work for you now.
Invest in NPS on Fisdom and enjoy a tension free Retirement Life!!
