Senior Citizen Saving Scheme: A Complete Overview

Senior Citizen Saving Scheme: A Complete Overview

1. Why should you invest in SCSS?

Investing in SCSS is a good opportunity for senior citizens above 60 years to make money. This is an effective and long-term saving option which offers security and added features that are usually associated with any government-sponsored savings or investment scheme. These schemes are available through certified banks and post offices across India.

2. Eligibility for SCSS

The following people/groups are eligible to opt for  SCSS:

1. Senior citizens of India aged 60 years or above.
2. Retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age bracket 55-60. Here the investment has to be done within a month of receiving the retirement benefits.
3. Retired defense personnel with a minimum age of 50 years.
4. HUFs and NRIs are not allowed to invest in this scheme.

3. Investment Amount

An individual can invest a maximum amount of Rs.15 lakh, individually or jointly in an SCSS account (in multiples of Rs.1,000). The amount invested in the scheme cannot exceed the money that has been received on retirement. Hence, the individual can invest either Rs.15 lakh or the amount received as a retirement benefit, whichever is lower. The account can be opened by cash for an amount below Rs.1 lakh and by cheque for an amount exceeding Rs.1 lakh.  

4. Benefits of investing in SCSS

1. Safe and Reliable: This is an Indian government-sponsored investment scheme and hence is considered to be one the safest and most reliable investment options.

2.Simple and easy process: The process to open an SCSS account is simple and can be opened at any authorized bank or any post office in India. It is also transferable across India.

3.Good returns: At 7.4% the return rate is very good as compared to a savings or FD account.

4. Nomination: Nomination facility is available at the time of opening an SCSS account by means of submitting an application as part of Form C. This submission is also accompanied by the passbook to the Branch.

5. Tax benefits: Tax deduction of up to Rs.1.5 lakh can be claimed under Section 80C of the Indian Tax Act, 1961.

6. Flexible: The tenure of this investment scheme is flexible with an average tenure of 5 years which can be extended up to 3 additional years.

5. How to open an SCSS account

An SCSS account can be opened in any of the authorized banks or post office branch across India with following documents:

1. Form A  has to be filled for opening an SCSS Account.
2. Identity proof like PAN card, Passport to be presented.
3. 3. Address proof such as Telephone bill, Aadhar card is mandatory.
4. 4. Document for proof of age is required. This could be in the form of a Passport, Senior Citizen Card, a Birth certificate issued by the Corporation or Registrar of Births and Deaths, Voter ID card, PAN card etc.
5. 5. 2 Passport size photographs.

All the above documents must be self-attested.

6. Interest rate on SCSS Account

Below are the interest rates offered historically on the Senior Citizens’ Savings Scheme:

Period	Interest Rate
Up to 2012	9%
2012-13	9.3%
2013-14	9.2%
2014-15	9.2%
2015-16	9.3%
2016-17	8.5%
2017-18 (Q1)	8.4%
2017-18 (Q2)	8.3%
2017-18 (Q3)	8.3%
2017-18 (Q4)	8.3%
2018-19 (Q1)	8.3%
2018-19 (Q2)	8.3%
2018-19 (Q3)	8.7%
2018-19 (Q4)	8.7%
2019-2020 (Q1)	8.7%
2019-2020 (Q2)	8.6%
2019-2020 (Q3)	8.6%
2019-2020 (Q4)	8.6%
2020-2021 (Q1)	7.4%

7. Tenure of the fund and withdrawal

The tenure of this scheme is 5 years with the option to extend it for 3 more years. In order to extend the scheme for another 3 years after the completion of the 5-year tenure, the investor is required to submit the duly filled Form B for the extension of the scheme. Only one extension is allowed, and such extended accounts can be closed after one year of extension without any penalty.

Premature withdrawals are allowed but only after a year of opening an account. If the closure of the account takes place after one year but before the end of 2 years, 1.5% of the deposit is deducted in the form of pre-mature withdrawal charges. Upon closure of the account after 2 years an amount equal to 1% of the deposit shall be deducted as charges.

In the event of the death of the depositor, no charges or penalty is levied for the premature closure of the account.

8. Banks applicable for SCSS Account

Following are the banks where an SCSS account can be opened:

1. Allahabad Bank
2. Andhra bank
3. Bank of Maharashtra
4. Bank of Baroda
5. Bank of India
6. Corporation Bank
7. Canara Bank
8. Central Bank of India
9. Dena Bank
10. IDBI Bank
11. Indian Bank
12. Indian Overseas Bank
13. Punjab National Bank
14. State Bank of India
15. Syndicate Bank
16. UCO Bank
17. Union Bank of India
18. Vijaya Bank
19. ICICI Bank

To sum it up, SCSS is a very good scheme for senior citizens who want a decent risk free return on a corpus fund. At an 8.5% interest rate and an investment amount of 15 lakhs, the monthly income is stated to be Rs 10,625 per month for each investor.

BENEFITS OF INVESTING IN MUTUAL FUNDS...

म्यूच्युअल फ़ंड्स को अक्सर निवेश करने का एक जटिल माध्यम समझने की गलती की जाती है. जबकि इनकी निवेश विचारधारा बिल्कुल सरल है और ये निवेशक को तरह-तरह के फ़ायदे दिलाते हैं जैसे कि विविधिकरण, आपके पैसों का प्रोफेशनल तरीके से प्रबंधन, किफ़ायती स्वरूप, पारदर्शिता और नकदीकरण आदि. इस वीडियो में हम आपको बताएंगे कि निवेशक को म्यूच्युअल फ़ंड क्या-क्या फ़ायदे दिला सकते हैं और आपके आर्थिक लक्ष्यों को पूरा करने के लिए एक अच्छी खासी पूंजी बना सकते हैं. बस इसके लिए ज़रूरी होता है सही प्रकार के फ़ंड्स को चुनना और अपने आर्थिक लक्ष्यों को पाने के लिए उचित लक्ष्यों को पाने के लिए उचित समय देना.

WHAT IS A MUTUAL FUND?

निवेश की दुनिया में रखने वालों के लिए, म्यूच्युअल फ़ंड्स का नाम भले ही थोड़ा जटिल/पेचीदा हो, मगर सच्चाई यह है कि म्यूच्युअल फ़ंड्स में उलझनवाली कोई बात नहीं है और यह उन लोगों के लिए फ़ायदेमंद है जो इक्विटी, डेट, सोने आदि में निवेश का लाभ तो उठाना चाहते हैं मगर इसके लिए ज़रूरी कौशल, समय या बड़ी पूंजी उनके पास नहीं है. म्यूच्युअल फ़ंड एक प्रोफेशनली मैनेज़्ड इंवेस्टमेन्ट/ professionally managed investment माध्यम है जहां आप छोटी रकम का निवेश करते हैं और बड़े फ़ायदे पाते हैं. इसके लिए बस आपको अपने लक्ष्य बनाते हुए सही स्कीम्स चुननी होंगी. म्यूच्युअल फ़ंड्स आपको अनुकूलता, नकदीकरण क्षमता, टैक्स लाभ और जोखिम का विविधिकरण जैसे कई फ़ायदे, एक छोटी सी कीमत पर दिलाते हैं. इस वीडियो में हम आपको म्यूच्युअल फ़ंड्स की विस्तृत जानकारी देने जा रहे हैं.

How to benefit from not stopping your SIP...

Those who stop SIP due to fear of loss often miss the opportunity

History has repeatedly proven that market downturns are the best opportunities to make super-normal returns from your equity investments. Unfortunately, most investors tend to flee the stock markets during these times. Those who remain invested with conviction eventually laugh their way to their bank when the markets eventually rise. Be one of these smart investors. Don’t stop your SIP!

Book Review-A Piece of the Action

How the Middle Class Joined the Money Class...

Common mistakes to be avoided while investing, to create huge wealth.....

We have all made mistakes in past and most likely would also make mistakes in future. Making mistakes is not crime but is something human in nature.However, we must learn from past mistakes and failure to do so is most undesirable. When it comes to personal finance decisions, the best way of learning is by analysing the opportunity cost for our bad decisions.

Opportunity Cost:
But before we start, let us first understand what is 'opportunity cost'. The opportunity cost can be understood as

• the cost of doing any action measured in value terms of the best alternative that is not chosen or is foregone.
• a sacrifice value of the second best choice available to someone who has picked among multiple choices

Opportunity cost is a key concept in economics, and is used in decision making where there are scare resources to be optimally utilised. The concept can be applied beyond financial costs: you may apply it for lost time, pleasure or any other resource that provides some benefit. Thus, opportunity cost can not only help us in evaluating investment decisions but also can be universally applied to any decision that we take.
Analysing Wrong Decisions:
Let us now attempt to analyse our decision using opportunity cost and a few case studies. The case studies are random examples of what most of us usually are or have ended up doing in past.

Case Actual / Inaction taken Without proper Financial Planning The Right Alternative Without proper Financial Planning Opportunity Cost Action (1) Result Action (2) Result 1 Age 35 yrs to Retire at 60. Life exp. 90 years. Montly Expense Rs.25,000/- Retirement Planning to be done. Kitty needed: After 25 years Rs.2.36 Cr. Delayed by 5 years . Asset Class: Equity SIP Need: Rs.17,783/- Total paid: ~ Rs.42.68L Started at age 35 Asset Class: Equity SIP Need: Rs.8,561/- Total paid: ~ Rs.25.68L Additional amount paid for same result = Rs.17 lacs Started on time. Asset class: Debt Monthly Need: Rs.18,984/- Total paid: ~ Rs.56.95L Additional amount paid for same result = Rs.31.27 lacs 2 Monthly savings of Rs.10,000 for a Goal after 15 years (Child Marriage / Education / 2nd Home, etc.) Asset class: Debt End value: Rs. 40.16Lacs Asset Class: Equity End value: Rs. 61.64 Lacs Shortfall in wealth: Rs.21.47 Lacs for wrong asset class 3 Age: 50. Retirement 60. SIP of Rs. 25,000 to be done for remaining earning life (10 years) SIP delayed for just '3' months End value Rs. 62.75 Lacs SIP started immediately End value Rs. 65.75 Lacs Shortfall in wealth: Rs. 3 Lacs for missing 3 SIPs 4 Additional monthly Savings possibility of Rs.2,000/- Possibility ignored No wealth created Identified & Eq. SIP 15 yrs done End value: Rs. 61.64 Lacs Additional wealth creation foregone: Rs.12.33 Lacs 5 A amount of Rs.250,00 for 6 months in Current A/c. Ignored No returns Invested in MF Cash schemes Returns: Rs.8,600/- Returns foregone: Rs.8,600/- 6 An individual meets accident / illness Inaction to take any Policy All costs on self Health Policy is taken Costs on Insurer All costs paid in absence of cover 7 Earning member plans to take life insurance (LI) LI on own assessment Inadequate life cover Proper LI need assessment Sufficient cover taken Insufficient money (goals / expense)

Above is for illustrative purpose only. Assumptions: MF Equity returns: 15%. Debt returns: 10%. MF Cash: 7%. Inflation 6%. Post Retirement Inflation 4%. Returns on Kitty: 8%. Some figures are rounded off.

Including the above instances, we can short-list the following very common types of action / inaction that have lost opportunity costs attached to it...

• Planning for financial goals: Here the opportunity cost is often in nature of inability to meet the targeted value fully if we either delay savings for goal or invest in wrong asset class.
• Retirement planning: This is highlighted here since it has huge impact involved which are not very apparent to us and is often ignored. There can be huge opportunity costs in terms of the required savings to be done and the retirement kitty created if we delay or invest in wrong asset class. The biggest risk is that the kitty becomes insufficient to meet our expenses during retirement.
• Ignoring Insurance: Ignoring, delaying or taking inadequate insurance is very common. Lack or inadequate life insurance is something very scary since the idea of our loved ones left without any money in itself is unimaginable. Still most of us take inadequate cover without finding out actual cover required and instead directly start looking at products. The opportunity cost in absence of medical insurance is something which would now be very obvious.
• Idle money not invested: Due to financial indiscipline, we often ignore investing less substantial money on time in appropriate avenues and money is often left idle in form of hard cash or current / savings account balance. We must invest idle money, beyond that required for emergency, running expenses, etc., into liquid MF or similar schemes / products for the small durations of time available. A regular practice of doing so actively can help you good returns on idle money which is not visible to us now.
• Common investment related bad decisions.: If we can summarise, there would largely be 3 types of bad decisions w.r.t. investments:
  • Investing in wrong asset class as per investment horizon
  • Delay in starting investments or SIP
  • Investing inadequate amount
• Other bad decisions: Apart from above we also have many other common instances of bad decisions like...
  • Investing in 'Ponzi', 'Get Rich Quick' or 'Chain Marketing' schemes with hopes of making huge money!
  • Taking personal loans for avoidable reasons
  • Making cash withdrawals from credit cards
  • Not paying credit card dues on time inviting very high interest costs
  • Making delayed payments of utility bills, etc. attracting additional money for every instance

The famous and the most successful investor – Warren Buffet has said that “you only have to do a very few things right in your life so long as you don't do too many things wrong” to be successful. Indeed, many small things ignored add up and become significant enough to impact our lives. And bad investment / financial decisions are no different.
The following are the suggested ways that will help us go a long way in improving our financial situation over long term.

• Always remember that every financial action or inaction has some opportunity costs
• Procrastination or laziness is a big enemy for wealth creation
• Small things make big impact over time. Discipline, awareness and active decision making are the right habits to adopt
• Prepare comprehensive financial plan at the earliest. Do not shy away from seeking advice on small financial matters.

The idea behind this article is to make you aware that every financial decision has costs attached to it and that proper planning, discipline and timely action in our financial matters can help us ensure that we keep the wrong things to the minimum in our lives. A few wrong things are enough to overshadow the benefits from many rights things that we may have taken.