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POMIS Vs SCSS Vs PMVVY Vs Bank FD: A Comparison To Seek Regular Income

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There are many investment options to decide from for those investors who prefer a regular income on their portfolios. That being said, certain investors, who are mainly senior citizens, need their holdings to be secure, stable, fixed and at a good rate of interest. Pradhan Mantri Vaya Vandana Yojana (PMVVY), the Senior Citizens Savings Scheme (SCSS), bank fixed deposits and the monthly income scheme (POMIS) of the post office are the four investment vehicles which senior citizens should consider in terms of good returns. Many of these comply with an interest rate of either monthly or quarterly and bear guaranteed returns. But which can be the best choice here among the four. Let's compare and hunt the one for you as a senior citizen.

Post Office Monthly Income Scheme

Post Office Monthly Income Scheme

The monthly income scheme of the post office is for a term of 5 years. The interest rate on the monthly income scheme of the Post Office is currently 6.6 percent per annum and paid on a monthly basis. By depositing a minimum amount of Rs. 1000 and a multiple of Rs. 100, one can invest in this scheme and this amount can go up to Rs. 4.50 lakh in the case of a single holder and Rs 9 lakh in the case of a joint holder. Interest is payable at the end of the month from the date of opening and so on until maturity. In the event of any additional deposit made by the depositor, the excess investment will be refunded and only the interest of the PO Savings Account will be repaid from the date of opening of the account to the refund date. No premature withdrawal is approved under POMIS before the maturity date of 1 year from the date of deposit. A penalty of 2% from the principal will be deducted in case the POMIS account is closed after 1 year and before 3 year from the date of account. Whereas the penalty is kept at 1% if the account is closed after 3 year and before 5 year from the date of account opening.

Senior Citizens Savings Scheme
 

Senior Citizens Savings Scheme

The assured return is for 5 years in the SCSS. SCSS can, therefore, be extended for 3 years after completion of the maturity period, but the existing interest rate will apply. Currently, the SCSS interest rate is 7.4 percent per annum and is paid on a quarterly basis. Only those over the age of 60 can invest in SCSS and in Rs 1000/- and Rs 15 lakhs respectively with the minimum and maximum deposit is capped. In the event of any excess deposit made to the SCSS account, the excess balance will be automatically refunded to the depositor and only the interest rate of the PO Savings Account will be valid from the date of the excess deposit to the refund date. Deposit under this scheme counts for the tax benefit under section 80C of Income Tax Act, 1961. The account can be closed prematurely any time after the opening date, but if the account is closed within 1 year, no interest will be accrued, and if any interest charged in the account is retrieved from the principal amount. Likewise, an amount equal to 1.5 percent will be withheld from the principal amount if the account is closed after 1 year but prior to 2 years from the date of opening. Consequently, if the account is closed after 2 years but within 5 years from the date of launch, an amount equivalent to 1% of the principal amount will be withheld. The account can be closed after 5 years from the date of opening by submitting to the appropriate post office a specified application form with a passbook.

Pradhan Mantri Vaya Vandana Yojana

Pradhan Mantri Vaya Vandana Yojana

Deposits can be made in Pradhan Mantri Vaya Vandana Yojana (PMVVY) for 10 years and the return for the year 2020-21 is 7.40 percent per annum. Pradhan Mantri Vaya Vandana Yojana (PMVVY) is a pension scheme introduced specifically for senior citizens aged 60 years and above by the Government of India, effective from 4 May 2017 to 31 March 2020. The scheme now has been extended to 31 March 2023 for a period of 3 years after 31 March 2020. The pension is due at the end of each year over the 10-year policy period, in compliance with the monthly/quarterly/half-yearly/annual frequency selected by the pensioner at the date of acquisition. The purchase price along with the final pension contribution shall be due in respect of the existence of the pensioner up to the expiration of the policy duration of 10 years. After 3 policy years, a loan of up to 75 percent of the purchase price is allowed to cover emergency needs. The purchase amount shall be due to the recipient upon the demise of the pensioner within the 10-year period of the policy. Via the official portal of LIC (http://www.licindia.in/) you can open and manage this scheme.

Bank FDs

Bank FDs

Currently, certain banks deliver a return of around 7 to 8% over different periods on FDs. From as low as 7 days to a term of 10 years, one can invest in Bank FD. In banks, the 5-year tax saving FD is also accessible. There is an additional rate of interest of 0.5 per cent per annum for senior citizens. Many small finance banks give investors a marginally higher return rate. In bank FDs, the interest rate can be kept on a monthly, quarterly, semi-annual or annual basis. There are several corporates that provide up to 9 percent on FDs as well, apart from small finance banks and major commercial banks.

Our take

Our take

The earning potential of your hard-earned money is eroded by inflation. It is important to offset inflation by receiving a favorable investment return. A bank FD allows you to receive a higher interest rate that can allow you to generate higher returns. As in the case of market-linked securities, the yields on a bank FD are fixed and there is no chance of any risk. A bank FD is one of the suitable options if you are cautious or averse to risk and want to generate fixed returns to meet the envisaged financial goals. Similarly, if the tenure is wisely picked, a bank FD can also pay attention to your liquidity needs and tackle short-term goals. You can also consider a Tax Saver bank FD for tax relief, and get a tax gain under Section 80C of the Income Tax Act, 1961. In her 2020 budget speech, Union Finance Minister Nirmala Sitharaman proposed that bank deposit cover in designated commercial banks should be raised to Rs 5 lakh per depositor from the existing Rs 1 lakh. Deposits with all commercial banks and cooperative banks are currently covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC). Under DICGC, only primary cooperative organizations are not covered.

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