Here are five investment options where senior citizens can park their hard-earned savings to get a regular risk-free income.
New Delhi: Investors looking for fixed regular income on their capital have been the worst hit in this falling interest rate scenario. While top banks offer maximum 6% to senior citizens on their fixed deposits with a tenure between 5-10 years, post office small savings schemes provide relatively higher rate. However, investment experts believe that the current high rates on small savings schemes may not sustain further and it is just a matter of time that the government cuts interest rates on these schemes although for the current April-June quarter the interest rates cut was reversed. Under this scenario, here are five investment options where senior citizens can park their hard-earned savings to get a regular income
1. Senior Citizen Saving Scheme (SCSS)
SCSS is a five-year scheme and one can open more than one account but the total amount that can be invested in all the accounts is capped at Rs 15 lakh. Interest rate on this scheme is fixed by the government every quarter. For the current April-June quarter, SCSS will provide 7.4% per annum. Once you invest in this scheme you will continue to get the interest rate for the entire five-year period. However, interest earned in Senior Citizen Saving Scheme is fully taxable; it is taxed as “Income From Other Sources”. Given the high-interest rates and sovereign guarantee of principal amount, SCSS suits senior citizens looking for a high fixed rate of return and a regular income on a quarterly basis.
2. Post Office Monthly Income Scheme (POMIS)
POMIS is also a five-year scheme and once invested the interest rate continues to remain the same till maturity. For the current April-June quarter, interest rate on this scheme is fixed at 6.6% per annum. One can invest a maximum of Rs 4.5 lakh in a single name while a maximum of Rs 9 lakh can be deposited if the account is opened in joint names. As the name suggests, interest payout is made on a monthly basis in this scheme.
3. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This scheme has been extended up to March 31, 2023. At present, the scheme is providing guaranteed pension at 7.40% per annum payable monthly. However interest rate on this scheme will be reset on April 1 every year and accordingly, the pension amount will change based on the new rate. The annual reset of the assured rate of interest will be in line with the revised rate of returns of SCSS but up to a ceiling of 7.75%. Once this threshold is achieved, a fresh appraisal of interest rate will be done. Maximum investment allowed in this 10-year investment scheme is Rs 15 lakh. On completion of the 10-year tenure, the principal amount along with the last instalment of pension will be returned to the purchaser.
4. Floating Rate Savings Bonds
The Floating Rate Savings Bonds 2020 has a tenure of 7 years and interest rate on this scheme will change every six months and is linked to the interest rate paid on National Saving Certificate (NSC) plus 35 basis points spread. Interest on this scheme is paid twice in a year- on January 1 and on July 1. At present, the scheme fetches 7.15% interest, which is fully taxable in the hands of the receiver. There is no upper limit for investment in this scheme.
5. Bank fixed deposits (FD)
Bank fixed deposits have always been the most popular investment scheme for senior citizens. But of late these schemes have lost their charm because of falling interest rates. Bank FDs provide the flexibility to choose your desired payout option-monthly, quarterly, half-yearly or annually. At present most of the large banks are providing up to 6% interest on FDs to senior citizens for a tenure between 5-10 years. However, some of the small finance banks and co-operative banks are providing more than 7% interest rate on senior citizen FDs.
