Senior citizens in India are given many extra financial benefits in Income tax, bank fixed deposits, port office or schemes designed specially for them. As you near your retirement, your income, and risk capacity decreases. So, one should make the choice wisely considering all financial avenues available in the market depending on the risk factor.
Investing in riskier instruments may not be safe as you will not be able to recover the capital in case of downfall due to time constraints, as some financial instruments generate returns only if it is held for longer duration.
Investing in risky instruments considering short term is not a good idea. However, one can consider instruments with moderate risk to beat inflation and maintain a good lifestyle.
Before selecting the product one should consider all aspects such as liquidity, taxation and time horizon of the instrument.
Here are 6 low-risk investment which senior citizens can consider for decent returns with the safety of capital.
1) Bank Fixed Deposits
This is the most preferred financial instrument among risk-averse individuals. The major benefit of investing in bank fixed deposit is it attracts higher interest rates for a senior citizen.
And bank fixed deposits are highly liquid, any individuals can break the fixed deposit online or by visiting the branch.
TDS is applicable for the payment that is made towards an account that is earning over Rs 10,000 as interest.
2) Company fixed deposits
A senior citizen can consider this investment option depending on the rating on the company fixed deposits. These deposits are rated by rating agencies considering safety and risk of the deposits. They offer at least 1 per cent more interest than bank deposits.
Mahindra Finance, Bajaj Finserv, KTDFC, TN Power Finance are some of the safe deposits. Two of these are state govt owned entities. Check company deposit interest rates here
3) Post Office Monthly Income Scheme
This scheme is considered as safe as it is is backed by the Government of India and hence there is ample safety. This scheme is ideal for those who are looking for monthly income without bearing any risk.
There is no tax deduction at source and there is no tax benefits under Section 80C. What this means is that you cannot claim any tax exemption on the amount. While the interest earned is taxable.
4) Senior Citizen Savings Account
This is a specialized account only senior citizen who has attained the age of 60 years (55 years for those who have retired on superannuation or under a voluntary or special voluntary scheme) or above on the date of opening of the account.
Investment under this scheme qualifies for the benefit of Section 80C of the Income Tax Act, 1961. TDS is deducted at source on interest if the interest amount is more than Rs 10,000/-.
5) Mutual Funds Monthly Income Plans
One cannot ignore the inflation rate, to match the returns with inflation one can consider investing in Mutual funds monthly income schemes where a small portion will be invested in equities and rest in debt and other government instruments.
Any profit made before a year will attract short-term capital gains and it will be added to your income and taxed as per your slab. After 1 year it will attract 10 per cent tax with indexation and 20 per cent without indexation.
6) Pension Plans
There are banks and financial institution such LIC, which offer an interesting variety of pension products depending on the need.