From Director’s Desk | Anirudh Dar

I hope you enjoyed reading the previous edition of my blog last week, where I had spoken about the most popular Section 80C, tax saving options. In this week’s edition, I will highlight some more avenues to save tax and a few must-know things about them.

This week I will cover the SCSS, NSC, 5-Year Tax Savings bank fixed deposits and the immensely popular Sukanya Samriddhi Yojana.

Senior Citizen Savings Scheme (SCSS) is a savings schemes that is sponsored by the Government of India for individuals who are above the age of 60. This scheme was started in 2004 with a very clear objective of providing senior citizens with a safe, secure and a steady source of income post their retirement. It is an extremely attractive savings scheme with comparatively better returns than most others. For the last few years, the rates for this scheme have moved south with the current rate of interest being 7.9% per annum. However, despite this negative, since this is backed by the Government, hence there is no risk to capital, something that most seniors are worried about, come their retirement. An SCSS scheme can be applied for at Post Offices as well as public and private banks.

The maximum SCSS limit deposit is Rs.15 lakh. Deposits made into the SCSS mature after 5 years that is calculated from the date of account opening. However, one does have the option of extending the account for an additional 3 years after it has matured. This extension option is currently available just once and the extension request must be made within 1 year of maturity of the SCSS account. It is worth noting that the interest on SCSS is fully taxable. In case the interest amount earned is more than Rs. 50,000 for a fiscal, TDS is applicable to the interest earned. Deposits made into this scheme are compounded and paid out annually.

National Savings Certificate (NSC) is a fixed income investment scheme that can be opened at any post office. Also sponsored by the

Government of India it is a savings bond that is primarily targeted towards small to mid-income investors to invest in, while saving on income tax at the same time. Similar to the PPF, this scheme too is a secure and low-risk product. The NSC can be bought in the name of a minor or with another adult as a joint holder. Like the SCSS, the NSC also comes with a fixed maturity period of five years. While there is no maximum limit on the purchase of NSCs, but only investments up to Rs.1.5 lac are eligible for a tax break under Section 80C. The NSCs earn a fixed interest, which is currently at a rate of 6.8% per annum.

Tax Saving bank fixed deposit is a fixed deposit that qualifies for tax deduction under Section 80C, up to the limit of Rs. 1.5 lac. While this kind of an FD is locked-in, in the untimely demise of the account holder, the same can be prematurely withdrawn if there is a nominee or an authorized person in place. While the nomenclature for this type of a fixed deposit may sound different, it is the same as any regular bank deposit, except the lock-in period is 5 years and the interest rates range from 5.5% – 7.75% currently. Investment in these FDs can be done through any public or private sector bank except for co-operative and rural banks. Finally, it is important to note that the interest from these deposits is fully taxable.

Sukanya Samriddhi Yojana is one of the most popular Government-backed savings schemes and was introduced as a part of the BetiBachao, BetiPadhao Yojana for the benefit of the girl child. Such an account can only be opened for the girl child who is under the age of 10. Currently, this scheme offers an interest rate of 7.6% compounded annually. Parents can open two SSY accounts for girls and a third account can be opened in case of birth of twins/triplets. The minimum annual contribution to the SSY account is Rs.250 and the maximum is Rs.1.50 lac in a financial year.

One needs to invest at least the minimum amount every year for up to 15 years from the date of account opening. Thereafter the account will continue to earn interest till maturity. The SSY has a tenure equal to the time the girl child is 21 years of age or upon her marriage attaining the age of majority (18 years). However, contributions only need to be made for 15 years. From a taxation perspective, SSY investments are designated as an EEE (Exempt, Exempt, Exempt) investment. This means that the principal invested, the interest earned as well as the maturity amount are tax free.

With this, we come to an end on our topics of the various tax saving schemes in India. If you missed the previous edition and would like to read it again, you could do so here. I hope you have enjoyed reading these, and this will help you make informed choices when it comes to your tax saving decisions now and in the future.

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