The once all-time favourite form of investment for most of the earning people in India which is fixed deposit is losing its shine gradually owing to its falling interest rates. The fixed deposit which is one of the safest best for investment fetches a regular investment for a fixed period.
Most of the senior citizens in India who are retired usually prefer to park their funds in these deposits as it provides a regular interest with which they can fill in their monthly expenses, but now with the declining interest rates, it is becoming difficult for them to meet both the ends. So to avoid such a scenario, it is better to spread the retirement corpus amount across several fixed income saving schemes to ensure stable cash inflow.
Let's check the list of Best Saving Schemes Options for Senior Citizens.
Post Office Monthly Income Scheme
The Post Office Monthly Income Scheme (MIS) is a saving scheme offered by the India Post and it allows the investor to generate a monthly income to meet their financial requirements. It offers an interest rate of 6.6% per annum (from April 1, 2020) which will be payable monthly and will be revised every quarter.
Income will be earned in the form of interest every month.
Key Features of Post Office Monthly Income Scheme
• Who can Apply - Any Indian citizen who is aged above 10 years can open the scheme.
• Period of Investment - The lock-in period of the scheme is 5 years.
• Account Operations - Joint account with three maximum adults can also be opened.
• Account Transferring Options - This account can be transferred from one post office to another.
• Nomination facility - Yes, it is available.
• Minimum and Maximum Deposit - An investment in multiples of Rs 1000 can be made with a maximum investment of Rs 4.5 lakh in case of a single account and up to Rs 9 lakh in case of a joint account.
• Interest Payout - Once an individual start investing, they will receive a payout from their invested amount beginning from the first month and the same will be credited to their account at the end of every month.
• Taxation - Interest earned from this scheme is fully taxable as this scheme does not fall under Section 80C of the Income Tax Act. There will be no deduction for TDS.
• Premature Withdrawal Facility - Yes, is available but is subject to a penalty of 2% if withdrawal is made within 3 years from the date of starting the scheme and 1% penalty charges will be levied if withdrawn after 3 years.
• Post Maturity - This account continues to fetch interest for up to two years after maturity and if the proceeds of the same are not withdrawn by the investor.
Senior Citizen's Saving Scheme
This saving scheme which is backed by the government is offered in most of the banks and post offices located across the country. This scheme aims to provide a firm source of income for senior citizens during their retired life.
It earns an attractive interest rate of 7.4% per annum and rates will be revised every quarter, but once invested, the interest rate will remain the same during the entire tenure of the scheme.
Key Features of Senior Citizen's Saving Scheme
• Who can Apply - Any individuals who are aged 60 years and above can open this scheme. Anyone who has opted for Voluntary Retirement Scheme (VRS) or in the superannuation age (55-60 years) can also opt for this scheme.
• Period of Investment - The tenure of the scheme is 5 years and can be extended for another 3 years (extension is available only once).
• Minimum and Maximum Deposit - A minimum deposit of Rs 1,000 can be made to open an account and the maximum amount of Rs 15 lakh or the amount received as retirement benefit (whichever is lower) can be deposited.
• Nomination Facility - Yes, it is available under this scheme.
• Interest Payout - Investors are eligible to get quarterly disbursal against their deposited money and the said amount will be credited to their account on the first date of April, July, October and January (every quarter).
• Taxation - This scheme falls under the Section 80C of the Income Tax Act of 1961 and hence the principal amount of up to Rs 1,50,000 is eligible for tax deductions. But the interest amount earned is fully taxable and is subject to tax deducted at source (TDS).
• Premature Withdrawal Facility - Investors can withdraw after the completion of one year of opening of the account and penalty charges of 1.5% will be levied if an account is closed after 1 year and charges of 1% will be levied if an account is closed after two years.
Pradhan Mantri Vaya Vandana Yojana
This saving scheme rolled out by Life Insurance Corporation of India (LIC) is a guaranteed pension product for retirees which comes with death benefits. The scheme offers an interest rate of 7.4% per annum with a monthly payout.
The interest rates on this scheme will be revised annually, but once invested, it remains the same throughout the tenure of the scheme.
Aadhaar Card is mandatory under this government-backed subsidized scheme for validation purpose.
Key Features of Pradhan Mantri Vaya Vandana Yojana
• Who can Apply - Any individuals who have completed 60 years of age can apply for this scheme and there is no maximum entry age limit for this scheme.
• Period of Investment - Lock-in period of the scheme is 10 years.
• Payout Frequency - Policyholders can get either monthly, quarterly, half-yearly or annual payout with a minimum monthly pension payout of Rs 1,000 and a maximum of Rs 9,250. Payment will be done through Aadhaar Enabled Payment System or via NEFT.
The payment of the first instalment of pension will be paid after 1 year or 6 months or 3 months or 1 month from the date of purchase of the policy and depending on the mode of payment.
• The maximum amount of Investment - Investment amount varies based on the frequency of pension payments and the maximum set limit for senior citizens should not exceed Rs 15 lakh for monthly payout.
• Taxation - Entire pension amount is fully taxable and there will be no deduction available for the invested capital amount.
• Premature Withdrawal Facility - Yes, this facility is available but under exceptional circumstances, if the policyholder or their spouse is terminally ill. If in case, the policyholder dies during the tenure of the policy, then the purchase price will be refunded to the beneficiaries.
• Loan Facility - Policyholders can avail loan after completing 3 policy years and a maximum loan of 75% of the purchase price will be granted. The interest rate for the loan will be determined at periodic intervals.