Recently, the government increased the rate of interest on Senior Citizens Savings Scheme (SCSS) to 8.2 per cent. Higher interest helps senior citizens who are planning to invest in SCSS increase their regular income. As SCSS is meant for lump sum investment, it’s crucial to know how it can help you build a regular cash flow after you retire from an active work life.

Salient Features Of SCSS

You can start investing in SCSS with a minimum amount of Rs 1,000 and can increase it in multiples thereof. The maximum amount that an individual can invest is Rs. 30 lakh. If you also invest in your spouse’s name, then this investment amount can be increased up to Rs. 60 lakh. You cannot invest in SCSS in instalments, say like a systematic investment plan (SIP).

Investing Rs. 30 lakh at 8.2 per cent per annum will fetch you around Rs. 61,500 every quarter. This works out to approximately Rs. 20,500 per month. The interest payout is done every quarter on April 1, July 1, October 1, and January 1. The payment is towards the accumulated interest for every three months.

The tenure of investment is five years but this can be further extended by another three years. The purpose of investment in SCSS is to ensure regular periodic payments.

The income from SCSS is taxable and taxed in accordance with your income bracket. So, if you fall in the 20 per cent tax bracket, the income tax will take away 20 per cent of the amount earned in a particular financial year. Also, if the interest payment is more than Rs. 50,000 in a year, the excess amount will be liable for a TDS at 10 per cent.

One has to be aged 60 years and above to invest in SCSS. But people aged 55 years and above can also invest in it provided they are retired. Defence personnel can invest after the age of 50 if they have taken retirement.

The account can be opened through a post office or an authorised bank.

Investing In SCSS For Regular Cash Flow After Retirement

SCSS can be one of the key asset classes for a diversified investment portfolio after one’s retirement.

Along with a safe and decent rate of return, it can also ensure a timely quarterly income. If your monthly income requirement is not more than Rs 20,000 and you can invest Rs 30 lakh, SCSS can be a good option to meet your monthly financial needs. However, you must not rely only on SCSS for your post-retirement income. Depending on your risk appetite, monthly financial and lifestyle needs, one should also invest in other asset classes, such as fixed deposits and debt mutual funds, etc.

Process For Investing In SCSS

One can visit the nearest post office where the scheme is offered. The post office will hand over a form and ask for requisite documents, such as passport-size photographs, copy of Permanent Account Number (PAN), Aadhaar and so on.

Alternatively, one can also go to an authorised bank and fill out the form and deposit the cheques for investment.

The author is an Independent Financial Journalist