Three safe investments options for senior citizens amid low FD rates  |  Photo Credit: BCCL
- One can invest a maximum of Rs 15 lakh in SCSS in multiples of Rs 1,000
- The interest income received from SCSS is eligible for tax deduction under Section 80TTB
- PMVVY will provide an assured rate of return of 7.40% in the monthly interest payment mode
New Delhi: Senior citizens prefer to park their money in investment options that offer guaranteed returns and are risk-free. With interest rates coming down constantly over the years, senior citizens are finding it difficult to put their money in an investment that will offer them good returns.
As senior citizens are mainly dependent on interest income, their income has fallen by up to 30% over the last year, making it difficult for them to manage their expenses. In such a situation, senior citizens have started looking at other assured return options like Senior Citizen Saving Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) to get higher fixed interest.
Here are three other safe investment options for senior citizens:
Senior Citizen Savings Scheme (SCSS): An individual over 60 years can open a single or a joint account with spouse, under this scheme, with any post office or any designated bank. Non resident Indian (NRI) and person of Indian origin (PIO) are not eligible to invest in SCSS. Those who have taken voluntary retirement invest their retirement corpus in this scheme even before 60 years but after 55 years.
Those who have retired from defence service, can also open account under SCSS anytime. In both the cases for opening account before 60 years, the account needs to be opened within one month from receipt of the retirement money. Under this scheme, senior citizens can open one or more accounts during one or more years. The maximum amount invested should not exceed Rs 15 lakh at any given point of time. The minimum amount for opening an account under SCSS is Rs 1,000.
The account under SCSS has an initial tenure of five years which you can extend once for three years. You can withdraw money after one year but with a penalty. The rate of interest applicable for the accounts opened during the current quarter is 7.4% which is valid for full tenure of five years. The rate applicable is announced every quarter for accounts opened during that quarter. The amount deposited under this scheme is eligible for deduction under Section 80C.
Pradhan Mantri Vaya Vandana Yojana (PMVVY): The pension scheme has a policy term of 10 years and the pensioner can choose monthly, quarterly, half-yearly, or yearly mode of pension. Now, the interest in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) is higher than the fixed deposit scheme offered by SBI. The scheme will provide an assured rate of return of 7.40% in the monthly interest payment mode. If you invest in this pension scheme in the financial year, then 7.40% return will be locked in for the entire duration of ten years.
Any individual who is 60 or above the age of 60 can avail of the benefits of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme. The maximum allowed investment in this scheme is Rs 15 lakh. This pension scheme is marketed by Life Insurance Corp. of India and can be bought online as well as offline.
Unlike SCSS, there is no tax benefit for money deposited under this scheme. There is no provision for deduction of tax on annuity payments but the amount of annuity received by you is taxable and you will have to discharge the tax liability yourself. So in case you do not wish to avail the tax benefit under Section 80C, this product is better than SCSS from liquidity perspective.
You can withdraw money from PMVVY before completion of 10 years but only under exceptional circumstances like for treatment of terminal illness or critical illness of the spouse or self but with 2% deduction from the principal amount. You can also avail loan up to 75% of the amount deposited by you after three years. The amount of interest on loans is adjusted against pension payable to you. Any amount of loan remaining unpaid shall be adjusted against the principal payable.
RBI floating rate savings bonds:
If you have already exhausted limit of 15 lakhs available under SCSS and PMVVY each and still have some amount remaining that you wish to invest, you can invest your retirement corpus in the floating rate savings bonds issued by the Reserve Bank of India (RBI) with tenure of seven years. There is no age limit or the maximum amount up to which you can invest in these bonds. These bonds can be bought online and offline through the authorised banks. These bonds have a tenure of seven years after which the same are redeemed at face value.
Any person who is a resident of India can invest in these bonds. A resident who becomes a non-resident, later on, is allowed to continue to hold these bonds. Unlike SCSS and PMVVY where the rate of interest gets fixed for the full tenure, the interest under these bonds keeps floating and the interest for a half year is announced by RBI in advance. Presently the interest rate is pegged at 0.35% higher than those payable on National Saving certificates (NSC). Any change in the interest on NSC shall automatically change the interest payable on these bonds.
The interest on these bonds is taxable and subject to deduction of tax at source. Individuals between the age of 60 and 70 are allowed to go for premature redemption of these bonds during the seventh year i.e. the last year of the bond’s tenure. The individual bond holder who is between 70 and 80 can go for early redemption anytime after five years and for those above 80 years can go for redemption after the bonds have run for 4 years. However, this premature redemption comes with a cost.