SCSS or PPF or SSY: Which savings scheme is the best for you?

Government-backed savings schemes are an excellent risk-free investment avenue to earn good returns on your money.

SCSS or PPF or SSY Which savings scheme is the best for you

If you are looking to invest in safe instruments that offer good returns, government-backed savings schemes are a good option to consider for your investment portfolio. Their risk-free and reliable nature ensure that your money is safe, and they also provide significant returns that help your savings grow. Read on for a detailed account of three government-sponsored savings schemes and how you stand to benefit from each.

Senior Citizens Savings Scheme (SCSS)

Especially designed keeping the financial needs of senior citizens (those 60 and above) in mind, SCSS offers a regular stream of income and helps financially secure senior citizens  after retirement. An SCSS account can be opened with a post office or any private or public bank in India.

Key features of SCSS:

  • Indian citizens aged 60 and above, retirees who have opted for the voluntary retirement scheme (VRS) or superannuation in the age bracket 55-60 years, subject to fulfilment of certain conditions, and retired defence personnel of a minimum 50 years are eligible for this scheme.
  • An individual can open this account jointly with a spouse too.
  • The interest rate offered under SCSS is revised every quarter. However, the interest rate locked in at the time of investment is not affected by these alterations. The interest rate as of FY 2021-22 is 7.4%. 
  • The minimum investment required to open an SCSS account is Rs 1000 while the maximum amount is capped at Rs 15 lakh.
  • The maturity period is 5 years and can be extended for another 3 years. However, an extension is allowed only once, and the prevailing interest rate of the corresponding quarter would be applicable.
  • The account holder can close their account prematurely, but premature closure will attract a penalty of 1.5% if requested within 1-2 years of account opening and 1% if requested after 2 years.
  • Account holders are eligible to receive quarterly disbursals. Interest payment will be credited to an individual’s account on the first date of April, July, October, and January.

Related: Senior citizen savings scheme: Why it makes a good addition to retirement planning

Public Provident Fund (PPF)

PPF was introduced with the aim of helping people mobilise small savings into an investment instrument. It is an ideal option for anyone looking to park their savings in a safe, long-term investment vehicle to earn guaranteed returns and save on tax. An Indian citizen can open a PPF account with a bank or a post office with just Rs 100 as the opening balance. Some private banks allow you to open an account online too.

Key features of PPF:

  • Currently, PPF offers an attractive interest rate of 7.1%.
  • It has a term of 15 years, which can be extended in blocks of 5 years.
  • The minimum investment required for a PPF is Rs 500 and the maximum limit is Rs 1.5 lakh for each financial year. Investments can be made in a lump sum or in a maximum of 12 instalments.
  • Interest on PPF is tax free and contributions to the PPF are tax deductible up to Rs 1.5 lakh per annum under Section 80C of the Income Tax Act, 1961.
  • A PPF account holder can designate a nominee for their account, though an account cannot be opened in joint names.
  • One can avail of a loan against their PPF account.
  • PPF allows full withdrawal of the account balance along with accrued interest only upon completion of its tenure (15 years). However, if you are in need of funds, you can make a partial withdrawal after completing 6 years. A withdrawal can be made only once in a financial year.

Related: Get 1 crore by investing in PPF wisely

Sukanya Samriddhi Yojana (SSY)

SSY is a government savings instrument especially created for the welfare of girl children aged 10 or younger. It was introduced in 2015 as part of the ‘Beti Bachao Beti Padhao’ campaign with an objective to ensure the financial independence of women. The idea was to encourage parents to invest and secure the future needs and long-term goals such as marriage, higher education, and overall financial stability. One can easily avail of the SSY scheme by opening an account at any post office or an authorised bank.

Key features of SSY:

  • With an interest rate of 8.5% as on FY 2018-19, SSY offers one of the highest interest rates among such savings schemes. This interest rate varies quarterly.
  • The minimum deposit is Rs 250 and the maximum is Rs 1.5 lakh.
  • Under section 80C of the IT Act, investors can claim tax benefits on deposits. The accrued interest as well as the maturity amount is exempted from taxes.
  • An SSY account can be opened by a parent or legal guardian for a girl child. A maximum of two such accounts can be opened by a parent/legal guardian for two girls.
  • The account matures in 21 years or once the girl child gets married after the age of 18.
  • Premature withdrawal of 50% of the account balance can be made after the girl reaches 18 years of age.

Related: Want to build a stable and secure future for your children? Here’s what you can do

Summary: 

  Senior citizens Savings Scheme (SCSS) Public Provident Fund (PPF) Sukanya Samriddhi Account (SSS)
Suitability Citizens above 60 years of age Any risk-averse individual Parents of daughters
Interest 7.4% 7.1% 8.5%
Tenure 5 years which can be extended by 3 years 15 years which can be extended in a block of 5 years 21 years or upon the girl's marriage
Minimum and maximum amount

Min- Rs. 1,000

Max- Rs. 15 lac

Min. Rs. 500

Max. Rs. 1.5 lac

Min. Rs. 250

Max. Rs. 1.5 lac

Withdrawals Premature closure allowed with penalty charges

Full withdrawal only at maturity

Partial withdrawal after completing 6 years

Premature withdrawal of 50% allowed after a girl turns 18

An individual having a PF account can withdraw funds from the account as loan for various purposes. However, under the SCSS and Sukanya Samriddhi Account, loan facility is not available. '

Disclaimer: This article is intended for general information purposes only and should not be construed as investment or tax or legal advice. You should separately obtain independent advice when making decisions in these areas. 

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