6 Drawbacks Of Senior Citizens Savings Scheme

Outlook Money

Age Limit

Only citizens aged 60 and above are allowed to create an SCSS account. This age requirement implies that an individual who wishes to retire early cannot take advantage of the scheme.

Illiquid

The liquidity issue is a significant concern for retirees needing access to their funds for unexpected circumstances. The plan’s strict five-year lock-in restricts partial withdrawals, although it allows premature exits.

Investment Limit

Although SCSS has a maximum investment limit of Rs 30 lakh, this may be a limiting factor for those who can invest more for additional income.

Tax

The SCSS’s interest income is taxable as per the tax slabs. However, retirement savings plans like bonds and the Public Provident Fund (PPF) offer tax exemptions. 

No Compound Interest

Compounding interest is crucial for long-term wealth creation. However, the SCSS’s interest rate is computed only on the principal amount, not on accrued interest.

Accessibility

Private banks and investment platforms cannot offer the SCSS, which is only accessible through post offices and designated government-run banks.

Non Transferable

The scheme prevents individual from transferring their account to another person, which could be an issue if the transfer is necessary due to changes in financial situation, or emergencies.

Compiled By Himani Verma

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