You may anticipate your portfolio to give you a regular income and also generate wealth for your post-retirement life as a senior citizen. As a result, there are a plethora of financial products on the market that give apparent advantages to senior citizens, which include not only guaranteed returns on their investments, but also tax breaks. Senior folks, who rely on a steady stream of income, were now among the worst hurt by the current low-interest-rate environment. Top banks, such as the State Bank of India (SBI), give senior citizens a maximum of 6.2 per cent on fixed deposits with a term of 5-10 years, however, post office small savings schemes generate a higher rate, especially to senior citizens. Hence, if you are a senior citizen and want to invest for regular income, then the top 5 investments below with higher returns can be a part of your personal finance portfolio.
Senior Citizen Savings Scheme (SCSS)
Senior Citizens Savings Scheme (SCSS) is a government-backed scheme with a current interest rate of 7.40 per cent for the quarter of (April to June 2021). SCSS has a five-year term that can be extended by three more years. The maximum amount that can be invested in SCSS is Rs 15 lakh, and the initial investment must be in multiples of Rs 1000. Under Section 80C of the Income-tax Act, 1961, investments in SCSS are also eligible for a tax benefit of up to Rs 1.5 lakh per year. This option is ideal for senior citizens who are above 60 years of age and want a high fixed return with a quarterly income option. This is the only government-backed scheme that offers a similar term as of tax-saving fixed deposits. Since tax-saving FDs offered by SBI for an example, can currently only provide you with a 6.20 per cent return, this scheme can provide you with higher returns in the form of regular income during your post-retirement years.
Special Fixed Deposit Schemes
For senior citizens, bank fixed deposits have traditionally been a sensible choice as they get interest on a monthly, quarterly, half-yearly, or annual basis. SBI, ICICI Bank, HDFC Bank, and Bank of Baroda (BoB) are among the banks that provide special deposit schemes to elderly persons on deposits of five years or more. These special FDs are valid till June 30, 2021. Although depositors over the age of 60 receive an additional 0.5 percent interest on regular FD, special FD schemes for senior citizens bid a higher rate of return. Let's evaluate the interest rates on SBI, ICICI, HDFC Bank, and Bank of Baroda's special FD schemes for senior citizens.
|Special FD Schemes For Senior Citizens||ROI In %|
|ICICI Bank Golden Years Fixed Deposit||6.30%|
|HDFC Bank Senior Citizen Care Fixed Deposit||6.25%|
|Bank of Baroda Special Fixed Deposit Scheme||6.25%|
|SBI Wecare Deposit||6.20%|
Post Office Monthly Income Scheme (MIS)
The Post Office Monthly Income Scheme (POMIS) has a 5-year term and the interest rate remains unchanged until the maturity date. The interest rate is now 6.6 percent per annum for the quarter ending June 2021 and as the name suggests the taxable interest rates are payable on a monthly basis to the depositor. Under a single account, a maximum of Rs 4.5 lakh can be invested, while in a joint name, a maximum of Rs 9 lakh can be invested in POMIS. By making an initial deposit in multiples of Rs 1000, one can open a POMIS account. You can withdraw from the MIS scheme after one year, but there is a 2% penalty if you withdraw between 1-3 year and 1% penalty after three years.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
The Pradhan Mantri Vaya Vandana Yojana is a retirement scheme for senior citizens where they get a monthly pension in the form of an interest rate. This scheme is managed by Life Insurance Corporation (LIC). Currently, the scheme offers a 7.40 per cent annual guaranteed pension that is paid monthly. If the pensioner survives to the completion of the ten-year policy term, the money invested, together with the final pension instalment, will be paid to him or her. Senior citizens can enroll in PMVVY until March 31, 2023. Only resident Indians are eligible to purchase this policy. PMVVY provides pensions on a monthly, quarterly, and annual basis. This plan's pension payment is issued at the end of each period, according to the payment option selected by the contributor. By acquiring the policy for Rs 15 lakh, a senior citizen subscriber can earn a monthly income of Rs 9250 for ten years.
The purchase amount of Rs 15 lakh will be reimbursed to the subscriber at the end of the ten-year period. After three years of completion, one can also avail loan of up to 75% of the purchase amount under the scheme. The minimum purchase price for a monthly pension under PMVVY is Rs 1,62,162. This will result in a monthly pension of Rs 1000, with the subscription amount being refunded after ten years. The highest monthly pension buying price under PMVVY is Rs 15 lakh. This would provide a monthly annuity of Rs 9250 for ten years, with the initial subscription amount being refunded at the end of that time. The scheme will give a guaranteed pension of 7.40 percent p.a., payable monthly, for the Financial Year 2021-22. This guaranteed rate of pension will be paid for the entire ten-year policy term for all policies acquired until March 31, 2022. There are a variety of purchase price alternatives available which are as follows. One must remember that once a payment choice has been selected, it cannot be modified.
|The minimum and maximum Purchase Price under different modes of pension|
|Mode of pension||Minimum purchase price||Minimum pension amount||Maximum purchase price||Maximum pension amount|
|Yealry||Rs 1,56,658/-||Rs 12,000 per annum||Rs 14,49,086/||Rs 1,11,000/-per year|
|Half-yearly||Rs 1,59,574/-||Rs 6000 per half-year||Rs 14,76,064/-||Rs 55,500/-per half-year|
|Quarterly||Rs 1,61,074/-||Rs 3000 per quarter||Rs 14,89,933/-||Rs 27,750/-per quarter|
|Monthly||Rs 1,62,162/-||Rs 1000 per month||Rs 15,00,000/-||Rs 9,250/-per month|