Table of Contents
Today we are sharing savings schemes for senior citizens, One of the post office savings plans for senior citizens is the Senior Citizens Savings Scheme. The plan has the support of the Indian government. It provides investors with security as well as a steady stream of income in the form of interest payments. The investor’s account gets credited with interest every quarter. The Ministry of Finance adjusts interest rates every three months. For the quarter of January to March 2021, the SCSS interest rate is 7.4%.
The scheme’s minimum and maximum investment amounts are INR 1,000 and INR 15 lakhs, respectively. The five-year lock-in term for the Senior Citizens Savings Scheme. In addition, investors have the option of extending the plan for another three years. In addition, under Section 80C of the Income Tax Act of 1961, the investment in SCSS qualifies for a tax deduction. Interest income is, nevertheless, taxable, and if the interest exceeds INR 50,000, a TDS is deducted. During the filing of their income tax returns, investors can claim a tax benefit of INR 1,50,000.
Pradhan Mantri Vaya Vandana Yojana
Senior citizens can invest in the Pradhan Mantri Vaya Vandana Yojana. It includes benefits for both retirement and pension. The system is managed and operated by the Life Insurance Corporation, which is a government-run organization. provides a guaranteed profit The scheme has a ten-year duration.
The government has announced a revision to the scheme’s interest rate structure. The interest rate was fixed for the length of the investment under the old version of the scheme. The scheme’s interest rates, however, will now be announced every year, according to recent modifications. The monthly interest rate is 7.4% till March 31st, 2021. In other words, for the full ten-year period, it is 7.66 per cent each annum. PMVVY pays a monthly, quarterly, or annual pension.
Subscribers must be at least 60 years old to participate in the plan. INR 1,50,000 is the minimum deposit amount, and INR 15,00,000 is the maximum. A loan against one’s deposits is also available. After three years, you can apply for a loan of up to 75% of the purchase price.
Post Office Monthly Income Scheme
Post Office Monthly Income Scheme is offered by India Post or the Department of Post (POMIS). This scheme is supported by the Indian government. POMIS is a low-risk investment that pays depositors interest every month. Every quarter, interest rates are updated, and the rate for the quarter of January to March 2021 is 6.60 per cent. The program has a five-year lock-in period. The depositor has the option of withdrawing the money or reinvesting it in the scheme when it matures.
The minimum deposit amount is INR 1,500, while the maximum deposit amount per person is INR 4,50,000. The maximum limit is INR 9,00,000 in the case of a joint account. The POMIS account can also be transferred from one post office to the next. Additionally, after one year of account opening, the scheme permits early withdrawals. Premature withdrawals, on the other hand, are subject to a charge.
Senior Citizen FD
Traditional investing instruments for seniors are fixed deposits (FDs). Because they offer a guaranteed return, bank fixed deposits are the most popular investment option. Because the returns are assured in the form of investment, these are low-risk investments. The rate of interest on FDs varies from 3% to 7%. In addition, banks provide senior folks with a lower FD interest rate. On their fixed deposits, senior persons can earn up to 0.5 percent extra interest. A bank FD calculator can be used to calculate one’s prospective profits on bank FD investments. The Scripbox FD calculator is a free online tool for calculating bank fixed deposit returns.
Bank deposits are also liquid investments since they allow for a penalty-free early withdrawal. Banks also provide loans secured by fixed-income securities. Because interest rates are low, investors must put up a significant quantity of money to earn a significant amount of money in return. Senior citizens, on the other hand, should invest in bank savings because they are the safest option.
NTPC Limited, Housing and Development Corporation, NHAI, and Indian Railways Finance Corporation are examples of government infrastructure organizations that issue tax-free bonds. The bond has a ten-year maturity period. There is also a lock-in period till the investment matures. These bonds pay 5.5 percent to 6.5 percent in interest. Annual interest is paid by the bond issuer, and the entire amount is tax-free.
Because the schemes are government-backed, tax-free bonds are low-risk investments. As a result, there is little risk of default. In addition, the plan protects your money and provides you with a steady stream of income in the form of interest payments. As a result, it’s an excellent investment for retirees.
Investors can sell the bonds on the stock exchange even if there is a lock-in period. Because bonds trade in small volumes, their returns are based on the purchase price. Section 112 of the Internal Revenue Code makes bond gains taxable. If a bond is sold before it has been held for one year, the profits are taxed at the investor’s marginal tax rate. Let’s say you sell the bond after a year. Long-term capital gains will be taxed at a rate of 10% without indexation and 20% with it.
Mutual funds invest in equities and debt assets by pooling money from various participants who have similar goals. These are divided into three categories: equity, debt, and hybrid. Debt mutual funds invest mostly in debt and money market instruments, whilst equity mutual funds primarily invest in stocks. Equities and debt instruments are both invested in hybrid funds. Seniors can match their objectives to the fund’s goal and select the best option.
SIP investing is not the only way to invest in mutual funds. They can also use SWP to make recurring withdrawals from their investments. Investors can remove money from their mutual fund investments at regular periods using Systematic Withdrawal Plans. Monthly, quarterly, half-yearly, or annual withdrawals of a fixed or variable sum are available to investors. Investors have the option of withdrawing only their capital gains and leaving their original investment untouched. Furthermore, only the amount removed will be subject to capital gains tax. As a result, SWP not only generates consistent income but also saves money on taxes.
Bank Fixed Deposits and Recurring Deposits
On bank fixed deposits and recurring deposits, senior persons typically receive 0.5 percent greater interest rates than other consumers. Interest income of up to Rs 50,000 per year is tax-free for older citizens, according to Section 80 TTB of the Income Tax Act 1961. Interest on bank FDs, bank RDs, post office FDs, post office RDs, and savings accounts are included in this calculation.
Ordinary customers only obtain tax-free interest up to Rs 10,000 per year under Section 80 TTA of the Income Tax Act, 1961, and that too only from savings accounts, in comparison to the income incurred by senior individuals. Bank FDs (5-year maturity) are tax-exempt up to Rs 1.5 lakh, but the interest earned is taxable.
National Pension System
Senior citizens can invest in the NPS because it is open to anybody aged 18 to 65. Once you’ve established an NPS account, you can keep it until you’re 70 years old.
Tax deductions of up to Rs 1.5 lakh under Section 80C and an additional Rs 50,000 under Section 80CCD are available on NPS investments (1B). NPS funds are invested in equities and debt funds, according to the preferences of the investor, and create returns. NPS does not pay a fixed rate of interest, but the money in it can increase significantly quicker through equity investments.
In addition to providing life insurance, some life insurance contracts can be used as investment vehicles. Unit Linked Insurance Plans (ULIPs) and Endowment Plans are two examples of these types of investments. However, when purchasing such plans, investors should exercise caution and select the products with the lowest fees.
Premium allocation fees, policy administration fees, fund management fees, and mortality fees are only a few examples of insurance fees.
Most of an investor’s financial obligations have been completed as they approach retirement age. In addition, the vast majority of them would have made retirement plans. All they need is a consistent source of income to make up for the income they will lose once they retire. In addition, they must consider capital appreciation as a source of growth.
Investors are unwilling to incur any additional risks to gain an extra rupee at this time. Some investors, however, even at the age of 60, have a high-risk tolerance. The ideal investment strategy for senior citizens will enable them to earn a steady income while also allowing them to benefit from capital growth.