In an environment when bank fixed deposit (FD) interest rate is falling, Senior Citizens Savings Scheme (SCSS) is an excellent scheme for senior citizens. This 5-year, small savings scheme offers currently offers an interest rate of 8.6% per annum. Under this scheme, senior citizens can deposit a maximum of ?15 lakh and earn quarterly interest. But the interest earned is taxable. "The government can provide tax exemption to Senior Citizens Savings Scheme (SCSS) to support the senior citizens and this move will have a minimal impact on fiscal deficit of 2 basis points," SBI research team said in a report.

"Government has an excellent scheme for senior citizens.However, the interest on SCSS is fully taxable which is a major drawback of this scheme," it added in the report.

According the SBI report, March 2018 outstanding under Senior Citizen Savings Scheme was ?38,662 crore. "It will be fair if such amount is given full tax rebate as the revenue foregone by the government could be only ?3092 crore, that will have the minimal 2 bps impact on Government fiscal deficit," the report said.

"The impact of declining interest rate regime since 2015 is also being felt by the depositors / pensioners. It is in fact imperative in a country with less than 5% of the population having access to social security, that the bank depositors are at least compensated with a sufficient positive real rate of return and are treated at par with the borrowers too. Further considering that there are more than 4 crore pensioners who have average term deposits of ?3.34 lakh per account, the net impact on Private Final Consumption Expenditure (PFCE) due to low interest income could be a decline of 30 basis points," the report said.

TDS is deducted at source on interest from Senior Citizen Savings Scheme if the interest amount is more than ?10,000 per annum. Investment under this scheme however qualifies for the benefit of Section 80C of the Income Tax Act, 1961. Under Section 80TTB, senior citizens can claim deduction up to ?50,000 on interest earned from deposits.