SubscriberWrites: Senior Citizens Savings Scheme may see beneficial but needs careful consideration

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2. In the Budget Proposal for Financial Year (FY) 2023-24, the maximum limit of investment under the SCSS has been raised from Rs. 15 Lac to Rs. 30 Lac, which can be made in one lump-sum or instalments in one FY or over a few more FYs. It is a clever idea that senior citizens would now get an increased amount of periodic return (interest) on their total amount invested under SCSS. 
3. However, when one examines this scheme in detail, one can easily observe that the stated benefits are not really that great as have been envisaged and demonstrated:
4. Section 80C benefit: Investors will need 20 years to take full advantage of their investment of Rs. 30 Lac under 80C and that too if 80C benefit continues over 20 years as it is. If Rs. 30 Lac invested in 1 or 2 FY, 80C benefits will have restricted applicability. Further, senior citizens do normally have invested their savings into other schemes/deposits like ELSS, 5-years 80C Bank Deposit, PPF, etc., they may have 80C benefit partially. Thus, investment in SCSS shall have its own limitations for 80C benefits.
5. Investment security: Although deposits in SCSS may have better security being orientated towards the sovereign risk unlike market risks, Bank’s Fixed Deposits also do provide better security (excepting for some cooperative banks – urban or rural). At this age profile, seniors avoid investing into capital and money markets. Thus, safety concern also gets limited choice to opt for SCSS.
6. Higher Rate of Interest: Applicable rate of interest under SCSS is declared by the Govt. of India every quarter, which gets aligned to the market forces, general interest rate structure in the economy, etc. Annual interest rate is around 7.50% to 8.00 % (FY 2022-23). Whereas bank’s FDs fetch on an average interest rate of 6.50% to 7.00% for a term deposit of 5 years (similar tenure as of SCSS, ignoring for now the 3 years extendable period). Thus, the gross overall benefit works out to be around 1% (net being 0.80% after average tax of 20%) when compared to Public Sector Banks (PSBs). But if one compares this position with that of Private Sector banks, one finds that this overall benefit comes down to 0.50% to 0.25% (gross), and 0.35% to 0.18% (net), which is not so lucrative as demonstrated. If one compares the rate of interest currently offered between 8.10% to 9.00% for a similar tenure by the Non-Banking Financial Companies (NBFCs), the rate of interest applicable under SCSS may be quite lower than what is offered by the NBFCs. Of course, there will be a higher risk factor, which may be mitigated through investment only in a few big ticket NBFCs having higher ratings and financial soundness. But comparison with banks (including good private sector banks) still make good sense. Thus, the comparative option to earn a higher rate of interest under SCSS seems misplaced.
7. Pre-matured withdrawal of deposit: the conditions under which one can resort to the pre-matured withdrawal of deposit seems more stringent  than the pre-matured withdrawal under bank’s fixed deposit, where even without assigning any reason one can attempt withdrawal. Therefore, even this benefit does not sound attractive.
8. Transferability of deposit accounts across the country: Due to technological innovations now-a-days every institution provides such accessibility. No comparative benefit.
9. Room for extension of deposit: Currently other investment options also provide such an advantage, so it does not matter.
10. The point I am trying to make is that although one may argue that SCSS deposit are more beneficial, still one must keep in mind that the senior citizens do also contribute their best by keeping their hard-earned savings under SCSS and thus enabling Govt. to utilize the same for country’s development. If it is not so kept, the Govt. might have to borrow the equivalent amount through floatation of G-Sec. & then spend more than the current 8% rate of interest on servicing the borrowed funds. Hence, senior citizens do deserve compliments for this contribution rather than making them feel that they are simply being obliged by giving them minuscule extra interest. Afterall, it is a matter of risk-return consideration rather than a welfare measure.