How to earn ₹20,000 per month using SCSS while getting tax benefits? Explained

Senior Citizens Savings Scheme: Senior citizens in India often end up with little to no income after their retirement, and all their savings get used up quickly if they do not invest wisely. This is why the Government of India started the Senior Citizens Savings Scheme, popularly known as SCSS. This small savings scheme enables senior citizens to invest their hard-earned money and receive interests over time.

SCSS also offers certain tax benefits in certain cases, though it is not entirely tax-free. The SCSS has attracted retired investors with its attractive interest rates, quarterly payouts, and safety. Here is everything you need to know about SCSS and how you can earn more than ₹20,000 monthly.

What is SCSS?

SCSS is a government-backed small savings scheme designed for senior citizens to keep their finances steady after retirement. SCSS gives Indians over the age of 60 to have a secure and safe investment avenue.

Retired persons who have gone for superannuation, voluntary retirement schemes (VRS), or special VRS and are aged between 55 and 60 years can also take benefits from SCSS.

Under specific conditions, retired officials from defence services can also open an SCSS account after attaining the age of 50.

If you are opting for SCSS, you can open an account under just your own name or jointly with a spouse. An SCSS account has a maturity period of five years and one can withdraw the money after the expiry of the account. Alternatively, he or she may choose to apply for an extension of three years.

How much can you invest in SCSS?

The minimum amount you can invest in SCSS is ₹1,000 and thereafter in multiples of ₹1,000. The maximum investment is ₹30 lakh. The high amount of investment allows recent retirees to park their retirement benefits in a safe and secure scheme that has government backing and provides stable income.

What is the current interest rate of SCSS?

The current interest rate of Senior Citizens Savings Scheme is 8.2%. Interest rates are revised periodically depending on the condition of the economy and inflation rates at that time.

“Interest shall be payable from the date of deposit to 31st March/ 30th June/30th September/31st December on 1st working day of April/July/October/January as the case may be, in the first instance and thereafter, interest shall be payable on 1st working day of April/July/October/January,” according to the SCSS website.

How to earn ₹20,000 using SCSS?

It is possible to earn more than ₹20,000 with SCSS every month. Here is an illustration.

Suppose you have retired with substantial funds and invest ₹30 lakh into SCSS by opening an SCSS account at the bank or the post office.

Interest calculation: At the current SCSS interest rate of 8.2% per annum, which is compounded quarterly, you will get an annual interest of about ₹2.46 lakh.

When divided by 12 months, the amount comes to ₹20,500 per month.

What tax benefits does SCSS offer?

Deposits in SCSS qualify for deduction under Section 80-C of the Income Tax Act, 1961.

This also makes SCSS a tax-saving form of interest. Under this, you can claim up to ₹1.5 lakh deduction from SCSS.

However, it must be noted that only the principal amount qualifies for this tax benefit and you still have to pay income tax on the interest earned as per your income. If your income falls below the basic exemption limit, the interest can be treated tax-free.

You must also note that a 10% TDS is cut from the interest if it is more than ₹1 lakh per annum.

However, if your total income does not exceed the basic exemption limit, they can file Form 15H to avoid TDS.