Senior Citizens' Savings Scheme vs bank FDs: Which offers higher interest rate?

Retirement planning is important for all employees for a financially secure future.  Many investors want to invest their hard earned money in such saving options which offer secure return and allow a steady growth in retirement corpus fund. If you are planning to invest for your retirement, fixed deposits (FDs) and other small savings schemes could be suitable options. These investment instruments not only come with low-risk factors but also provide a range of benefits along with a higher rate of interest for senior citizens in comparison to what is offered to the general public. Among the available options, Senior Citizens' Savings Scheme (SCSS) and Fixed Deposit are two promising ones that elderly people can opt for.

Those who are navigating between the two investment options can scroll down to check the details and know the difference between the interest rates of SCSS and Bank FDs.

Senior Citizens' Savings Scheme vs bank FDs: Interest rates

While interest rates on fixed deposits are typically 25–50 basis points (bps) higher for senior citizens than for other depositors, these rates vary with each bank, tenure and amount. Interest rate on the Senior Citizen Savings Scheme (SCSS) is paid by the government every quarter, whereas the bank pays FD interest on maturity.

Bank FDs: One of the secure ways to save money for longer durations, Bank FDs offer an extra 0.5 per cent interest for senior citizens. Most banks offer between 3 and 7.25 per cent interest rates to investors, depending on the duration of investment in FDs.

Senior Citizens Savings Scheme (SCSS): The scheme offers an interest rate of 8.2 per cent to elderly people. The interest on the scheme is also payable quarterly.

Besides the differing interest rates, SCSS and FDs also have a few similarities such as the lock-in period.

SCSS vs FDs: Which one is better?

Both Senior Citizens Savings Scheme and Bank FDs are popular choices among investors above the age of 60 and come with a range of offers and tax-saving benefits. However, if we compare the two, the SCSS outperforms other FD schemes in terms of liquidity.

Unlike an FD, the SCSS interest can be withdrawn on a regular basis. In terms of tenure, fixed deposits have schemes ranging from 7 days to 10 years, while SCSS has a maturity period of 5 years, which can be extended for another 3 years. In the case of tax benefits, a senior person can claim an income tax deduction of up to Rs. 1.5 lakh under Section 80C of the Indian Income Tax Act, 1961 within the five-year tenure, while investors who have FDs for five years or longer can claim income tax deductions.

Given the differences between the two schemes, one can make the right choice based on the financial goals and investment horizon.