When the banks are continuously reducing the bank fixed deposit interests, Senior Citizens Savings Scheme (SCSS) would be a great choice for senior citizens. Senior Citizens Savings Scheme (SCSS) offers a interest rate of 8.6% per annum. As per this scheme, senior citizens are able to deposit the amount of maximum of ₹15 lakh and on which they can earn quarterly interest. However, the interest they will earn from it would be taxable. “The government can provide tax exemption to Senior Citizens Savings Scheme (SCSS) to support the senior citizens and this move will have a minimal impact on fiscal deficit of 2 basis points,” SBI research team said in a report.
“Government has an excellent scheme for senior citizens. However, the interest on SCSS is fully taxable which is a major drawback of this scheme,” it added in the report.
As per the report of SBI, The outstanding amount in March 2018 under Senior Citizen Savings Scheme was ₹38,662 crore. “It will be fair if such amount is given full tax rebate as the revenue foregone by the government could be only ₹3092 crore, that will have the minimal 2 bps impact on Government fiscal deficit,” the report said.
“The impact of declining interest rate regime since 2015 is also being felt by the depositors / pensioners. It is in fact imperative in a country with less than 5% of the population having access to social security, that the bank depositors are at least compensated with a sufficient positive real rate of return and are treated at par with the borrowers too. Further considering that there are more than 4 crore pensioners who have average term deposits of ₹3.34 lakh per account, the net impact on Private Final Consumption Expenditure (PFCE) due to low interest income could be a decline of 30 basis points,” the report said.