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investments schemes for senior citizens

By the time most people are senior citizens, they are no longer working because they’ve retired from their jobs. Many elderly prefer to invest in schemes specifically designed for them since they help to reduce financial burden. If you are a senior citizen who is looking for the best investment schemes available for the senior citizens in India, you are on the right page.

This article will guide you about some of the best senior citizens investment schemes available in the country. These investment options will certainly ensure financial stability to the senior citizens post their retirement.There are investment plans available not only for senior citizens but also for children. We have also discussed the investment plans for children in other post.

Why should a senior citizen make investments in schemes?

As a senior citizen, investment is as crucial as any other major decision in your life. After retirement, everyone wants a regular source of income and to acquire wealth for living the post-retirement life without any financial stress. Pensioners with regular income can invest in mutual funds which grow overtime. In case of salaried employees with no pension, it is best to direct their portfolio toward investment schemes that can provide them regular income. In order to maintain a good lifestyle, financial planning and investment are really important. When you invest as a senior citizen, your main focus should be the assured returns on a minimal risk margin.

Now, let’s discuss the best investment options available in India for the senior citizens in detail:

Senior Citizen Savings Scheme (SCSS)

Senior Citizens Savings Scheme (SCSS) has been one of the top investment options since its launch in August, 2004. It is a central government-backed saving scheme that has no risks. It is valid for those above 60 and promises assured income for the entire investment tenure. The aim of this investment scheme is to assure regular income after the senior citizens retire.

Let’s dive into all the details of this scheme:

Eligibility: This investment scheme is applicable for Indians aged 60 years and above. This scheme can also be availed by citizens who opt for Voluntary Retirement Scheme (VRS) or Superannuation while they’re 50-60 or those retired defense personnel who are 50-60 years of age. HUFs (Hindu Undivided Family) or NRIs (Non-Resident Indians) cannot avail the benefits of this scheme. 

Rate of Interest: The current rate of interest provided by the senior citizens scheme is 8.2%. SCSS rates are revised every quarter for the new investors. They are not applied to the already enrolled investors.

Investment Amount: Under this scheme, the maximum investment amount is Rs. 30 Lakh, and the minimum is Rs.1000.

Interest Payout: You get interest on a quarterly basis, after your first investment. According to your date of investment, the payouts from the senior citizens scheme are made on the first dates of April, July, October, and January. You don’t have the option of re-investing the interest unlike in case of some other schemes. This is because the scheme provides regular income to the senior citizens.

Tenure: 5 years in the maximum tenure of this scheme. After the tenure ends, you can extend the scheme for 3 more years but not longer than that. It is only a one-time facility. Also, in case of extension, the interest rates as per the quarter would be applicable.

Early Withdrawal: SCSS account can be prematurely closed anytime but only after year after account opening. For closing the account before 2 years, 1.5% of the deposited amount will be deducted due to penalty. After 2 years, 1% of the deposited amount will be deducted as penalty. In case of 3-year extended accounts (after reaching maturity of 5 years), the account can be closed without any penalty.

Tax Implications: SCSS comes under ETT category which means that the senior citizen will be exempt from taxation on investment amount. The income interest is taxed as per the income tax slab, also the maturity amount is again taxed as per section 80C. In addition to this, if the interest income received from this scheme crosses Rs. 50,000 in a financial year, TDS will also be applicable.

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Post Office Monthly Income Scheme (POMIS)

Post Office Monthly Income Scheme (POMIS) is recognized and validated by the Ministry of Finance. It is a no-risk scheme which provides fixed monthly interest to the senior citizens. The income on investment is provided by the concerned post office on a monthly basis.

Let’s go into the details of POMIS:

Eligibility: This scheme is a great investment option which is not exclusive to only the senior citizens. Citizens of India aged 10 years and above can invest in this scheme.

Rate of Interest: The interest rate offered by POMIS is  7.4% p.a. as of March, 2024. It changes every quarter. The interest rate is less than SCSS but it is still a healthy rate of interest in today’s time. 

Investment Amount: The minimum investment which can be made under POMIS is Rs 1500 while the maximum investment is Rs 4.5 lakhs if an individual invests under one name and Rs 9 lakhs if the individual invests under a joint account.

Interest Payout: POMIS provides fixed and guaranteed income on a monthly basis. The  monthly interest can be availed directly from the post office or you can transfer it to your savings account via ECS.

Tenure: You have to invest for a minimum of 5 years under POMIS. After the maturity period of 5 years, you can reinvest in the same scheme for additional 5 years or withdraw the funds completely. A Post Office Recurring Deposit is a good idea for reinvesting the funds.

Early Withdrawal: In case you’re in need of funds and want to withdraw them before the maturity date, you can opt for fund withdrawal after 1 year is completed. For withdrawing funds between 1-3 years, a penalty of 2% will be charged and in case of withdrawal between 3-5 years, a penalty of 1% will be charged.

Tax Implications: No TDS is applicable to the returns provided by this scheme. Returns from POMIS are regarded as an income from interest and are therefore taxable as per the slab rate of the investor. Once the POMIS investment reaches maturity, you are required to pay taxes on the principal amount received. POMIS investment is not eligible for the tax benefits under Section 80C.

Senior Citizen Fixed Deposits

The Senior Citizen Fixed Deposit Scheme was introduced in May 2020 with the goal of providing regular income to investors aged 60 years and above.

Let’s look into the details of the Senior Citizen FD:

Eligibility: It is a flexible scheme and is valid for all Indians over 60. Senior citizens who are NRIs can also avail the benefits of these FDs through their NRE or NRO accounts. Some banks allow customers who are over 55 and have taken early retirement to apply for Senior Citizen FD. The rules vary from bank to bank for FDs for the senior citizens.

Rate of Interest: This is no fixed rate of interest for each and every bank as the banks acknowledge both the short window and the market fluctuations due to the global crisis.

Large Banks currently offer Senior Citizen FD’s interest rate of up to 6.25% p.a. and the Small Finance Banks offer interest rates up to 7.75% p.a. on Senior Citizen FDs. As compared to the regular FD, the interest rates which are 0.25% to 1.0% more.

Investment Amount: A senior citizen must make a minimum investment of Rs. 5,000 (if booked online) or Rs. 10,000 (if booked at a bank branch) under this scheme. The banks decide the maximum amount for investment but it is generally limited to 2 crore.

Interest Payout: It depends on the chosen lock-in periods which can be monthly, quarterly, half-yearly or yearly. Senior citizens FD can be closed at any time but for premature closure, a penalty of 1% is taken. In case of a 5-year tax saver FD, premature withdrawal is not allowed.

Tenure: The tenure for Senior Citizens FD for short-term deposits is 180 days and for long-term deposits, it is 1, 3, and 5 years.

Tax Implications: This investment option for the senior citizens falls under the ETT category. There is no tax on FD interest amounting up to Rs 50,000 per year for the senior citizens. Investment under this scheme should be done after considering all the FD in other banks which are active in your name at present. Tax deduction can be availed up to Rs 1.5 lakh, as per Section 80C of the Income Tax Act, 1961, if you invest for a maximum period of the 5-year lock-in tax-saving FD.

Before you invest in the Senior Citizens FD Scheme, it is important to note that the interest rates are subject to change and your bank can revise them without giving any prior notice. If you are interested in availing a loan, you can do it by using Senior Citizens fixed deposit as a collateral. You know the terms and conditions of the fixed deposits for senior citizens, you must get in touch with the bank of your choice.

Mutual Funds

Mutual funds is a type of investment which involves pooling of funds from multiple investors and investing it across different asset classes such as equity and debt. This process is managed by experts known as fund managers and they ensure that the objectives of the fund’s investment are met. Most fixed-income investment instruments are only able to provide inflation level returns but the mutual funds have the potential to beat the inflation levels by a significant margin.

After retirement, your appetite for taking risks reduces and you’re really concerned about the safety of your capital. Investing too much of your wealth in equity-oriented mutual funds can potentially expose you to a level of volatility that you may not be comfortable with, especially in the short term. This is why you can invest in other options available to you i.e., debt mutual funds or hybrid mutual funds as they have little or no exposure to equity. Ultimately, it’s your decision on the option you choose depending on your risk appetite and the upcoming goals which you may have.

Let us dive into all the relevant details of the Mutual Fund Investments:

Returns: As there are different types of mutual funds, they contain different degrees of exposure to different kinds of assets due to which they offer different levels of return. Since mutual funds are market-linked, their returns are never fixed. The returns are dependent on the market’s performance. Although the mutual funds do involve risks compared to some other schemes, it also has the potential to create more wealth and growth. 

As a retired individual, if you’re looking to invest your money for a short period, you can opt for short term debt funds which invest in bonds that lend to companies having a good credit rating for 1-3 years. These debt funds can provide you with better returns as compared to a bank FD. 

Furthermore, in case you want some exposure to the debt as well as the equity investments, you can opt for conservative hybrid funds which have between 10 to 25 percent of their allocation to equities and 70 to 90 percent of the allocation towards the debt securities. Debt portion provides you safety of capital along with stable returns. On the other hand, equity exposure can offer you opportunities for wealth creation. Mentioned below are the categories of mutual funds along with their average returns in 10 years:

 

Mutual Fund – TypeAverage Returns (in about 10 years)
Short term/Duration funds7.81%
Conservative Hybrid funds8.34%

 

Investment Amount: In case you wish to invest monthly or create a lump sum investment, you can opt for Systematic Investment Plan (SIP). Most SIPs offered require you to make an investment of as low as Rs. 500 every month but this varies depending on the fund.

Tax Implications: As per the current taxation rules regarding mutual funds, after redeeming your investments, you have to pay the capital gains tax on the returns. In case of debt funds and debt-oriented hybrid funds such as conservative hybrid funds, the gains through investments held for a period of less than 3 years fall under short-term capital gains tax (STCG) so you must pay tax according to your income tax bracket. If you make redemption at least 3 years after holding the investment, the gains are classified as long-term capital gains tax (LTCG). After indexation, you are liable to pay 20 percent tax on LTCG.

Conclusion

Financial planning is crucial to lead a good lifestyle, especially in old age. As someone who is retired, it is really important to have a regular source of income. This is why a senior citizen should plan to invest his money in investment schemes specifically meant for the senior citizens to get the most benefits. Some of these schemes also come with tax benefits. As a senior citizen, your hard working years should give way to your relaxation and rejuvenation. The retirement investments for the senior citizens promise just that. These investments make sure you retire from work cheerfully but not from living your life to the fullest. 

We hope this article was helpful in guiding you about the various investment schemes which are available for the senior citizens. In case of additional help, you may get in touch with RegistrationKraft!

 

By Kashish

Content writer with a diverse portfolio spanning various subjects. With a seasoned background, I have been crafting professional content since 2019.

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