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In the second inning, Senior Citizens look for investment tools that can give good and fixed returns. Age is a major concern, senior citizens need to choose the best investment tool, especially in India is essential.
Amongst the various options, available one needs to choose which suits the needs.
Here is a list of the seven best investment tools available in India for investment. Study each investment tool properly and decide to invest according to your needs and wants. Here is a complete list of:
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Top 7 Investment Options for Senior Citizens Who Want Regular Income
1. Senior Citizen Savings Scheme (SCSS)
Senior Citizen Savings Scheme is a post office savings scheme offered for senior citizens. This scheme is backed by the government of India giving it safety and regular income to the investor.
The interest rates are revised and computed every quarter before crediting to investors’ accounts. The latest interest rate as of October – December 2022 is 7.60%.
The minimum investment amount is INR 1,000 while the maximum amount to invest is INR 15 lakhs. This scheme has a lock-in period of 5 years with an option to extend to a duration of three years.
The investment can be claimed under 80C of the Income tax Act 1961 while the interest earned is taxable. If the interest is more than INR 50,000 then the tax is deducted at the source.
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The investment can be withdrawn prematurely with some penalties and penalties are based on the tenure of the account. Premature closure can be done only after one year of account opening.
The closure within two years attracts a penalty of 1.5% penalty either on the invested amount or the deposited amount. Any closure after two years attracts a 1% penalty. In case of death before maturity, the account shall be closed and the details shall be done by the nominee or heir.
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2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)
Pradhan Mantri Vaya Vandana Yojana is another investment scheme for senior citizens that offers retirement and pension benefits. Life Insurance Corporation under the purview of the government manages and operates the scheme.
PMVYY has a tenure of ten years with a fixed return. Earlier the interest rate was fixed throughout the scheme.
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However, the government has changed the interest rate structure for the scheme and made it floating which shall be announced every year. The interest rate is 7.4% payable monthly as of March 2021.
In the entire duration, the interest earned would be 7.66% throughout the ten years. The interest pension pay-out can be monthly, quarterly, or yearly.
The minimum age of the investor should be 60 years while the minimum amount which can be deposited is INR 1.5 lakhs to a maximum amount of INR 15 lakhs. A loan amount of almost 75% can be availed against the deposited amount after three years.
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3. Post Office Monthly Income Scheme
Post Office Monthly Income Scheme (POMIS) is offered by India Post or the Department of Post. This a low-risk investment option backed by the Government of India.
The depositors can get regular monthly income as interest payments. The interest rate for Q1 2021 was 6.60%. The rates are revised every quarter. This scheme too has a lock-in period of five years.
Once the deposit is matured, the depositor can withdraw or reinvest the amount. The minimum deposit amount is INR 1,500 to a maximum limit of INR 4.5 lakhs per individual. In the case of individuals, the maximum limit is INR 9.0 lakhs.
The account can be transferred from one post office to another. After one year of account opening premature withdrawals with some amount of penalty.
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4. Senior Citizen Fixed Deposit
Senior Citizen fixed scheme is a traditional investment tool. This is the most preferred tool that offers fixed returns. Fixed Deposits are considered low-risk investments as the returns are guaranteed. The interest rates may vary from 3% – 7%.
However senior citizens may get a preferential additional rate of 0.5%. Investors can calculate Fixed deposit returns from banks by using various online FD calculators available online.
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The interest rate payment can be chosen by the investors. The interest payment can be chosen to be paid monthly, quarterly, or annually. The Fixed Deposits can be tax savings and are eligible under Section 80C of the Income Tax Act 1961.
Based on the income tax slab the interest shall be taxable. Interest beyond INR 50,000 shall attract tax deduction at source.
Bank deposits are liquid investments with premature withdrawals with some penalty. Banks also provide loans against Fixed deposits. With low interest rates, investors need to invest a hefty sum to receive considerable income.
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5. Tax-Free Bond
Government Infrastructure Organisations such as Housing and Development Corporation, NTPC Limited, NHAI, and Indian Railways Finance Corporation Issue Tax-Free Bonds.
The lock-in period for the bonds is ten years with an interest rate between 5.5% to 6.5%. The issuers pay interest annually and the entire amount is tax-free. The interest earned in Tax-Free Bonds is entirely tax–free.
The Tax-free bonds are low–risk investments. These are Government of India-backed schemes that reduce the chances of default. This scheme offers capital protection. This scheme also offers regular income in the form of interest payments making it an ideal investment for senior citizens.
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The investors can sell the bonds on the stock exchange at any time in the lock–in the period. The bonds trade in low volume hence the returns from the bond depending on the purchase price. Under Section 112, the gains from sales bonds are taxable.
If the bonds are sold within one year, then the gains are taxable based on the income tax slab of the investor. If the bonds are sold after a year, the long-term capital gains are taxable at 10% without indexation benefit while 20% with indexation benefit.
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6. Mutual Funds
Money from multiple investors with similar is pooled in mutual funds. The money is invested in debt securities and equities. The various investment tools of mutual funds are debt funds, hybrid funds, and equity funds.
Hybrid Funds are funds to invest in equity and debt securities. Equity Mutual Funds invest majorly in equities while debt funds invest in the money market and debt securities. Senior citizens can align their goals with the objective of the fund and choose the right one.
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In mutual funds, investors can invest through a monthly SIP option while giving them the option to withdraw the investments at regular intervals through Systematic Withdrawal Plans. Through SWP, investors can withdraw mutual fund investments at regular intervals.
Investors can withdraw fixed or variable amounts monthly, quarterly, half-yearly, or yearly. The capital gains can be withdrawn by the investor while keeping their capital intact.
Investors can have capital gains tax only on the withdrawn amounts. Thus, SWP not only provides tax efficiency but also provides regular income.
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A Smart Investment Option
For senior citizens, most of the responsibilities are completed. Many of the investors planned for their retirement. Senior citizens need additional sources of regular income to compensate for or enjoy life post-retirement.
Moreover, senior citizens also need to think about growth in the form of capital appreciation.
At the age of senior citizen, investors cannot risk even an extra rupee. At the age of 60, some still have high-risk tolerance. For any senior citizen, these investment schemes shall help to earn a regular source of income and aid in gaining from the growth of the capital.
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| INVESTMENT OPTION | RETURNS | INVESTMENT AMOUNT |
| Senior Citizens Savings Scheme (SCSS) | 7.6% p.a. | Min Rs. 1,000 |
| Pradhan Mantri Vaya Vandana Yojana (PMVVY) | 7.4% p.a. | Min Rs. 1,50,000 |
| Post Office Monthly Income Scheme (POMIS) | 6.60% p.a. | Min Rs. 1,500 |
| Senior Citizen FD | 3% – 7% p.a. | Varies between banks |
| Tax-Free Bond | 5.5%-6.5% p.a. | NA |
| Mutual Funds | 10% – 15% p.a Market Linked | Rs.100 |
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Investment Options for Senior Citizens: FAQ
Who is eligible for senior citizenship?
As the Indian Law, a senior citizen is a person who is a citizen of India and has an age above 60 years. A person between the age of 60 years and 80 years is known as a senior citizen while a person beyond 80 years is known as a super senior citizen.
What are the different mode of investment and their return on investment?
The overview of various investment options is as below.
Senior Citizens Savings Scheme (SCSS) – 7.6% p.a.
Pradhan Mantri Vaya Vandana Yojana (PMVVY) – 7.4% p.a.
Post Office Monthly Income Scheme (POMIS) – 6.60% p.a.
Senior Citizen FD – 3% to 7% p.a.
Tax-Free Bond – 5.5% to 6.5% p.a.
Mutual Funds – 10% to 15% p.a Market Linked
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