Senior citizens can consider these fixed-income investment options
With rising costs of living nibbling at their savings fund, here are a few options for senior citizens that offer better returns than bank deposits
With bank deposit rates plunging, senior citizens are among the most affected as they depend heavily on interest income from fixed deposits.
Currently, fixed deposits are giving an average return of around 5% while inflation is hovering at around 6%, giving negative rate of return.
Here are a few options which senior citizens can consider:
Senior Citizens Savings Scheme
Senior Citizens Savings Scheme as the name suggests is exclusively meant for senior citizens, who are above 60 years of age. It offers the highest return at 7.4% per annum payable quarterly subject to maximum limit up to Rs 15 lakh,
Apart from senior citizens retired employees above 55 years of age and below 60 years of age can also apply provided the investment is made within 1 month of receipt of retirement benefits. For defense employees the age limit is above 50 years of age and below 60 years of age.
Just like fixed deposits interest from SCSC is also taxable if total exceeds Rs 50,000 in a financial year. No TDS gets deducted if form 15 G/15H is submitted and the interest earned is not above the Rs 50,000 limit.
Pradhan Mantri Vaya Vandana Yojana
The retirement scheme is designed specifically for senior citizens, who are above the age of 60 years of age. The rate is reset every year at the start of the financial year and the scheme currently offers an assured return of 7.4% for 2020-21. On the minimum investment of Rs 1.62 lakh it offers a monthly pension of Rs 1,000. Similarly, on the maximum purchase price of Rs 15 lakh it offers a monthly pension of Rs 9250.
The policy is for the period of 10 years and the existing limit on investment is Rs 15 lakh. The frequency- monthly, quarterly, or yearly- of pension amount can be chosen as per your convenience.
LIC has been offering this pension scheme since May 4, 2017, it has now been extended further till March 31 2023. If there is a shortfall between the actual return earned under the scheme and the guaranteed return then the plan is subsidised by the government .
Floating Rate Bonds
Floating Rate Savings Bonds, 2020, offers a variable rate of interest and are issued by the government of India. It offers fixed return at 7.15% and comes with a lock-in period of seven years with a special provision for premature redemption for senior citizens. Unlike the above two options there is no age and investment limit in these bonds.
“These bonds were earlier known as RBI bonds and used to offer fixed rate of 7.75%. When interest rates started decreasing after the pandemic the government decided to launch floating rate bonds, said Anil Chopra, Group Director – Financial Wellbeing, Bajaj Capital.
The interest on these bonds is payable at half yearly intervals on January 1 and July 1 every year. They do not pay interest on cumulative basis. In addition, there is no upper investment limit on these bonds. The rate of interest of a floating rate bond is linked to National Saving Certificate (NSC) rate with a spread of (+) 35 bps, which is reset at a regular interval.
If you are looking for an alternative, then above mentioned options are some of the best options for senior citizens.