Savings

How to double the interest earned on investing

Savings plan for seniors: how to double the interest earned on the investment annually

Photo: BCCL

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings scheme designed to provide a regular low-risk income stream as well as tax advantages for older people. Pensioners can invest up to Rs 15 lakh in lump sum individually or jointly. It is available at all banks and post offices in India.

An interest rate of 7.4% is payable for the April to June quarter in the plan. The scheme is open to people aged 60 or over.

Retirees under the Voluntary Retirement Scheme (VRS) or retirement in the 55-60 age bracket can open an SCSS account within one month of their retirement. These people can only open an SCSS account when the source of investment is pension benefits within one month of receiving pension benefits. However, the Ministry of Finance, in a circular dated May 26, 2020, removed the one-month clause for those who retired during the lockdown period in 2020. The circular said the decision was taken to protect small investors from the effect of the national lockdown due to the Covid-19 pandemic.

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The scheme matures in 5 years and after maturity the account can be extended for another three years by submitting an application in the prescribed format within one year of maturity. In such cases, the account may be closed at any time after the expiration of one year extension without any deduction.

The maximum amount that can be deposited in this program is Rs 15 lakh. A person can open more than one account in his name or jointly with his spouse at any post office subject to the maximum investment limit of Rs 15 lakh by adding the balance of all accounts.

If an elderly person invests a sum of Rs 15 lakh for a period of 5 years at the current rate of interest, the quarterly interest would amount to Rs 27,750, i.e. an annual interest of Rs 111,000. maturity, the total interest earned on the investment would be Rs 5.55,000 lakh. The total amount received at maturity will be Rs 20,55,000 (principal plus interest for 5 years).

Now, interest earned can be doubled through joint deposits with a spouse. In the case of a joint account, the maximum allowed investment limit also doubles to Rs 30 lakh, as does the interest rate earned in 5 years. Thus, the annual interest earned by the elderly couple amounts to Rs 2.2 lakh per annum.