Senior residents, particularly those that are retired, want an everyday income to fulfill their family bills. Those who’re 60 years or above have a number of investments to select from, however not all of them present common curiosity funds on the deposits. Some senior citizen investment options offering common income funds embrace financial institution fastened deposits, Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office Monthly Income Scheme (POMIS), Senior Citizen Saving Scheme ( SCSS) and Floating Rate Savings Bonds 2020. One may additionally take into account debt funds to maintain money protected and get excessive tax-effective returns.
“Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), Post Office MIS and Short to Medium Term Debt Funds are good investment options for senior citizens. It is always good to diversify. While there is a cap on investments in SCSS, PMVVY and Post Office MIS, senior citizens should avail the maximum benefits of these investment options. Debt Funds can be a good alternative to Fixed Deposits, funds that invest in debt instruments that mature in 1 to 3 years. Usually, debt funds in the Short Duration and Banking & PSU category are good ones to invest in,” says Harshad Chetanwala, MyWealthGrowth.
The capital invested in any of those investment options is protected as it’s backed by the federal government assure.
Other than the debt funds, a few of them supply monthly returns whereas others might supply curiosity payouts on a quarterly and half-yearly foundation.
Bank fastened deposits
Bank fastened deposits have all the time been a preferred and the primary alternative for many senior residents. Bank FDs are versatile on the subject of selecting the curiosity rate payouts as they provide monthly, quarterly, half-yearly or annual curiosity income to the FD holders. Not all entrance line business banks are providing something above 6 per cent rate of curiosity. However, relying on the financial institution and tenure, most Small Finance Banks are providing an curiosity rate of above 7 per cent and even 8 per cent on a few of their tenure. The senior residents are provided an extra 0.5 per cent on the deposits by all banks.
In addition, some banks like SBI, ICICI Bank and HDFC Bank supply particular deposits to senior residents on deposits of 5-years and above. Under SBI Wecare Deposit’ for Senior Citizens, 0.3 per cent is moreover payable on 5 Years and above tenor. This scheme is until September 30, 2020.
Remember, every depositor of a registered insured financial institution together with business banks, scheduled banks and Small Finance Banks are insured as much as a most of Rs.5 lakh for all financial institution deposits, comparable to saving, fastened, present, recurring deposits below the Deposit Insurance and Credit Guarantee Corporation Act, 1961.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
‘Pradhan Mantri Vaya Vandana Yojana’ (PMVVY) has been prolonged as much as thirty first March 2023. The extension of PMVVY scheme will assist senior residents because the entry age within the scheme is 60 years. As per the phrases and situations below this plan, assured charges of pension for insurance policies bought throughout a yr will likely be reviewed and determined initially of every yr by Ministry of Finance, Government of India. For the primary monetary yr i.e. as much as thirty first March 2021, the Scheme will present an assured pension of seven.40 per cent every year payable monthly and thereafter to be reset yearly. The annual reset of the assured rate of curiosity with impact from April 1st of the monetary yr consistent with the revised rate of returns of Senior Citizens Saving Scheme (SCSS) as much as a ceiling of seven.75 per cent with a contemporary appraisal of the scheme on breach of this threshold at any level.
Senior Citizen Saving Scheme ( SCSS)
For those that are 60 years and above SCSS is a well-liked investment choice. The guidelines additionally enable a person of the age of 55 years or extra however lower than 60 years, who has retired on superannuation or below VRS to open account topic to the situation that the account is opened inside one month of receipt of retirement advantages. SCSS is for a interval of 5 years and a couple of account could also be opened, however the whole restrict is capped at Rs 15 lakh. Interest earned in Senior Citizen Saving Scheme is totally taxable and is to be added to at least one’s ‘Income from other sources’.
SCSS fits senior residents on the lookout for a excessive fastened rate of return and an everyday income on a quarterly foundation. After maturity, the account could be prolonged for additional three years inside one yr of the maturity by giving an utility in a prescribed format. In such instances, the account could be closed at any time after the expiry of 1 yr of extension with none deduction. Currently, (July 1 to September 30, 2020) the curiosity rate on SCSS is 7.4 per cent every year, payable quarterly.
Post Office Monthly Income Scheme (POMIS)
The Post Office Monthly Income Scheme (POMIS) has a tenure of 5 years. The rate of curiosity of all small financial savings schemes together with POMIS is notified by the federal government now and again on a quarterly foundation. As the identify suggests, the curiosity in POMIS is payable on a monthly foundation, whereas the principal invested in paid again on maturity. Currently, for the quarter ending September, 2020, the curiosity rate is 6.6 per cent every year. One can make investments a most of Rs 4.5 lakh in single identify whereas a most of Rs 9 lakh could be deposited in POMIS in joint identify.
Floating Rate Savings Bonds 2020
The authorities has launched the Floating Rate Savings Bonds 2020 (Taxable) scheme from July 01, 2020. The Floating Rate Savings Bonds 2020 (FRSB Bonds) could have a tenure of seven years and the curiosity rate will preserve various in the course of the tenure of the scheme. Currently, the rate of curiosity has been set at 7.15 per cent every year payable half-yearly. The curiosity on the bonds will likely be payable at half-yearly intervals on Jan 1st and July 1st yearly. There isn’t any choice to pay curiosity on cumulative foundation.
The coupon/curiosity of the bond could be reset half yearly beginning with Jan 1st, 2021 and thereafter each July 1st and Jan 1st. The coupon rate for first coupon interval, payable on January 1, 2021 is fastened at 7.15 per cent. The coupon rate will likely be linked/pegged with prevailing National Saving Certificate (NSC) rate with a variety of 35 foundation factors over the NSC curiosity rate.
Choosing the fitting investment
Better to diversify throughout these investment options but additionally preserve liquidity into consideration. Look at your taxable income after factoring in curiosity income from varied investment sources and attempt to preserve it beneath the exemption restrict. Make use of the 5-year tax saving financial institution FD to earn monthly income in addition to to avoid wasting tax. A retiree’s retirement portfolio ought to be such that it will possibly deal with reinvestment danger as effectively.