Because of its declining interest rates, the formerly-all-time favoured mode of investment that is a fixed deposit for almost all the investors of India is steadily dropping its glitter. Most retired senior citizens in India typically choose to invest their funds in FDs in order to get a regular interest rate. But considering the current dropping interest rate scenario, senior citizens are suggested to park their funds across the best-fixed income saving schemes of India to get secure and guaranteed returns. So, let’s find out the best saving schemes for senior citizens in India apart from FDs.
Post Office Monthly Income Scheme
This scheme is authorized by the Department of Posts Ministry of Communications Government of India which enables the senior citizens to earn interest in the form of monthly income against their investment in order to satisfy their financial needs. It provides an interest rate of 6.6 per cent which is pay-out annually and modified on a quarterly basis.
Key points of the scheme
- Any Indian citizen more than 10 years of age is eligible for the scheme
- The scheme comes with a lock-in period of 5 years
- One can also open a joint account on behalf of three maximum adults
- You can transfer your account from one post office branch to another
- Investment in multiples of Rs 1000 can be made in the case of a single account with a cumulative investment up to Rs 4.5 lakh and up to Rs 9 lakh in the case of a joint account.
- Interest will be paid to the investor at the end of every month from the date of deposit
- The interest received from this scheme is entirely taxable since it is not covered by Section 80C of the Income Tax Act. TDS will not be deducted.
- Premature withdrawal is available but a penalty will be charged of 2% if withdrawal is made within 3 years from the date of account issuance and 1% penalty will be charged if the withdrawal is made after 3 years
Senior Citizen’s Saving Scheme
Some banks and post offices around the country provide this government-supported saving scheme. This scheme seeks to provide senior citizens with a strong source of income throughout their retirement life. An attractive interest rate of 7.4% per annum is provided to the senior citizens and the rates are revised on a quarterly basis.
Key benefits of the scheme
- Individuals having the age of 60 or above can open the scheme and on the other hand, anyone who has applied for a Voluntary Retirement Scheme (VRS) or at the age of superannuation (55-60 years) can also apply for this scheme
- The scheme comes with a tenure period of 5 years and further can be extended to an additional 3 years
- One can start investing from a minimum amount of Rs 1,000 up to a maximum of Rs 15 lakh
- One can also add a nominee to his / her account
- Investors are entitled to earn a quarterly disbursement against their deposited funds, and that balance will be transferred to their account on the first day of April, July, October and January.
- The principal amount of up to Rs 1,50,000 is eligible for tax deductions under the Section 80C of the Income Tax Act of 1961. But the amount of interest received is completely taxable and hence TDS will be applicable
- Investors can make a premature withdrawal after the 1 year of the account issuance date. 1.5 per cent will be charged if an account is closed after one year and a penalty of 1 per cent will be incurred if an account is closed after two years.
Pradhan Mantri Vaya Vandana Yojana
This Life Insurance Corporation of India (LIC) carried out a saving scheme known as Pradhan Mantri Vaya Vandana Yojana which is a secured pension plan for retirees that also fits with death benefits. With a monthly payout, the scheme pays an interest rate of 7.4 per cent per annum and the rate is modified annually. You need to submit your Aadhaar Card for identification purposes under this government-backed guaranteed scheme.
Key benefits of the scheme
- Individuals having 60 years of age or above are eligible for this scheme
- This scheme comes with a lock-in period of 10 years
- The interest is payout on a monthly, quarterly, half-yearly or annual basis.
- The minimum investment amount of Rs. 1000 is to be done via Aadhaar Enabled Payment System or via NEFT.
- Payment of the first pension instalment would be paid after 1 year or 6 months or 3 months or 1 month from the purchasing date of the scheme and based on the payment method.
The maximum amount of the investment amount differs according to the frequency of pension contributions and does not exceed Rs 15 lakh for monthly contributions, the default cap set for senior citizens.
- The entire pension balance is completely taxable, and no deduction would be permitted on the amount of capital invested.
- Premature withdrawal facility is allowed but only based on serious circumstances.
- The recipients will be refunded the purchase price, in case the policyholder dies within the policy term.
- After completing three policy years, policyholders can avail for a loan up to a maximum of 75 per cent of the purchase price. The interest rate will be set at periodic intervals for the loan.