Finance Minister Nirmala Sitharaman in the Union Budget 2023 raised the maximum investment limit for the Senior Citizen Savings Scheme (SCSS) from Rs 15 lakh to Rs 30 lakh.
While the investment limit under the SCSS has been raised, it is to be noted that the other popular scheme for retirees called Pradhan Mantri Vaya Vandana Yojana (PMVVY) is set to close on March 31, 2023.
PMVVY is a 10-year scheme, managed by the Life Insurance Corporation of India, which offers a return of 7.4 per cent. It allows deposits up to Rs 15 lakh for a senior citizen.
“For Financial Year 2022-23, the Scheme shall provide an assured pension of 7.40 per cent p.a. payable monthly. This assured rate of pension shall be payable for the full policy term of 10 years for all the policies purchased till 31st March, 2023,” the product section of the LIC website stated. Till now there has been no announcement of the scheme being extended.
Senior citizens can now invest an extra Rs 15 lakh in SCSS from April 1, 2023, even as the other avenue in form of PMVVYY unless PMVVY is extended. The overall investment in senior citizen-oriented schemes would stay the same as before, ie Rs 30 lakh post-March 31, 2023 if at all PMVVY does not get extended. However, even if the scheme gets extended, the diversion of Rs 15 lakh investment option from PMVVY in SCSS would still be beneficial for seniors.
Senior Citizen Savings Scheme offers an interest rate of 8 per cent per annum with quarterly payout, while PM Vaya Vandana Yojana offers an interest of 7.4 per cent per annum with a monthly payout option.
The tenure of the Senior Citizen Saving Scheme of five years is half that of PMVY.
Moreover, senior citizens can claim a tax deduction of up to Rs 1.5 lakh for investments in SCSS under Section 80 C of the Income Tax Act, 1961. But investments in Pradhan Mantri Vaya Vandana are not eligible for deductions if you want to save income tax.
It is worth mentioning that senior citizens enjoy a higher level of tax-exempted income — Rs 3 lakh per annum under the old tax regime. Super senior citizens (age above 80 years) get a much higher tax-exempt income limit of Rs 5 lakh per annum under the old tax regime.
Senior citizens can invest in Pradhan Mantri Vaya Vandana Yojana before its current closure date of March 31, 2023, and invest another Rs 15 lakh in the SCSS after April 1, 2023.
In case the senior citizen has enough funds then an extra Rs 15 lakh can be invested in the Senior Citizen Saving Scheme post-March 31, 2023, as per the Budget 2023 announcement. It would mean till the PMVVY investment matures in 10 years, the senior citizen would get to earn a return on an investment of Rs 15 lakh in PMVVY and Rs 30 lakh in the SCSS, i.e., on a total of Rs 45 lakh.