New Delhi: Bank fixed deposits are a favourite investment option for many. But, Senior citizens who mostly depend on interest income for their expenses are going through a difficult phase as interest rates on fixed deposits have come down drastically.
As the economy is unlikely to recover anytime soon and lower interest rates are going to be a new normal, senior citizens need to have a re-look at their portfolio. Here we will tell you about four investment options where senior citizens can invest in the current scenario to earn higher returns.
- Senior Citizens’ Savings Scheme
One can invest a maximum of Rs 15 lakh in SCSS in multiples of Rs 1,000. Interest in this scheme is payable each quarter so it can be used as a regular income. SCSS account matures in five years after which one can extend it once for a block of three years.Despite a big reduction in the interest rates of small savings schemes, SCSS is still offering a rate of 7.45% for the current April-June quarter, much higher than any other fixed-return scheme available for senior citizens.
- Pradhan Mantri Vaya Vandana Yojana or PMVVY scheme:
The pension scheme has a policy term of 10 years and the pensioner can choose monthly, quarterly, half-yearly, or yearly mode of pension. Now, the interest in the Pradhan Mantri Vaya Vandana Yojana (PMVVY) is higher than the fixed deposit scheme offered by SBI. The scheme will provide an assured rate of return of 7.40% per annum in FY21. For those investing in this pension scheme in this financial year, it will fetch 7.40% per annum payable monthly interest for the entire duration of ten years.
Any individual who is 60 or above the age of 60 can avail of the benefits of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme. There is no entry age. One can buy PMVVY scheme from Life Insurance Corp. of India.
- RBI savings bondsThese floating-rate bonds are issued only in electronic form by the RBI at 7.15% per annum (0.35% above prevailing NSC rate. Rates reset every six months. Individuals (including Joint Holdings) and Hindu Undivided Families (HUF) are eligible to invest in these bonds. NRIs cannot invest in these bonds.
There is no maximum limit for investment in the bonds. The minimum investment starts from Rs 1,000 and in multiples of Rs 1,000, thereof. And, The bonds shall be repayable on the expiration of seven years from the date of issue. Premature redemption shall be allowed for specified categories of senior citizens.Interest received from these bonds will be taxed as per the income tax slab applicable to your income. Further, TDS will be applicable on the interest income.
- Post Office Monthly Income Scheme
For senior citizens looking to get a steady income, POMIS is a good option. The scheme currently offers 6.60% interest. While the minimum required investment Rs 1,000, the maximum is Rs 4.5 lakh for a single account and Rs 9 lakh for a joint account.
In order to open a POMIS account, you need to open a savings account with the same post office branch where you opened the POMIS account so that the monthly interest can be credited directly to the savings account and you can withdraw from it every month. The scheme comes with a maturity of five years but pre-mature withdrawal option is available after 1 year. But it will attract a penalty of up to 2%. The interest earned in POMIS is taxable.