1.Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme enables you to invest a minimum Rs.500 to Rs.15 lakh maximum during your lifetime.
Currently, (July 1 to September 30, 2019) the interest rate on SCSS is 8.6% per year, payable quarterly.
It can be invested as soon you as you retire at the age of 58 years. However, it has its limitations as it cannot be availed for more than five years with one option to extend upto 3 years
It is a very safe investment option as it is from Govt of India
Investment qualifies for deduction under Section 80C of the Income-tax (I-T) Act. However, this tax benefit is under the overall current ceiling of Rs. 1.5 lakh per annum fixed for all investments under Section 80C. The interest received under this scheme is taxable in the hands of the depositors
It can be opened in Post offices and some of the SBI branches
2.Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This investment has a tenure of 10 years and comes with a fixed return.
This can be done only through LIC of India, and the investment can be done either offline or online from LIC website.
PMVVY is available up to 31st March 2020.
The scheme can be purchased by payment of a lump sum called the ‘Purchase Price’. The pensioner has an option to choose either the amount of pension or the Purchase Price. The minimum and maximum Purchase Price are Rs. 1,44,578 and Rs. 14,45,783 for yearly pension, correspondingly providing an annual pension of Rs 12,000 and Rs 1.2 lakh respectively.
The pension rates for Rs.1000 of Purchase Price for yearly pension payment is Rs 83.00 per annum that makes PMVVY offer an annual return of 8.3 per cent. Considering falling interest rates, PMVVY can definitely be explored by senior citizens to invest a portion of their savings in it.
3.Post Office Monthly Income Scheme
This is the best savings scheme that enables you to deposit a maximum of Rs.4.5 lakh for single ownership and up to Rs.9 lakh for joint accounts.
This monthly income scheme in India offers you an interest rate up to 7.6% per year.
This option provides steady and safe returns unaffected by market forces.
It also has provision to transfer the returns directly into your savings account for ease of use.
This again has a maturity period of 5 years
4. Debt funds
Since these are mutual funds that focus on fixed income investments, they are considered safer
Long-term debt funds can offer you a higher value depending on the RBI Rate changes, market conditions & overall economy
They rank high in return on investment and provide you returns that can go as high as 15% per year.
They also offer high liquidity, though you may need to pay a charge for withdrawal before the minimum investment term.
For less than 3 years they are treated similar to bank FD’s i.e taxable as per the individual tax slab. However, if you hold more than 3 years, they are taxed at 20% after availing indexation benefit.
5.Tax-free Bonds
These are bonds that are issued by the government time to time to raise money
The interest returns are guaranteed and absolutely tax-free. There is no risk on your principal.
The tenor for these bonds can go from 10 years to 30 years, depending on the nature of the bond
The interest rate for these bonds usually range from 6% to 7.5% per year and these are currently on the decline owing to falling interest rates in the economy. Its good to buy them on the raising interest cycles.
These are offered by various government organizations such as Indian Railways Finance Corporation, Housing and Development Corporation, NTPC limited etc.
The maximum amount that can be invested is up to Rs.10 lakh.
However, these bonds do not offer flexible investment terms like FDs and the returns are not very lucrative when the economy is on a slow down.
6.Senior Citizen Fixed Deposits
The FD interest rates in most banks for senior citizens are higher than the regular rates by 0.25 % to 0.5%
These deposits have a flexible tenor ranging from 12 months to 120 months
This option is safe and free from market variables; however, the maximum amount insured is for Rs.1 L in the event of bank shutting down. One should restrict to public sector Banks or the top 3 private banks only.
A non-cumulative option is great for senior citizens as it helps them gain periodic interest payments (monthly, quarterly, or half yearly payout). They can use these payouts to meet regular expenses and for various other investments.
7. Company fixed deposits
Company or corporate fixed deposits are also popular amongst senior citizens who are willing to take slightly more risk. Currently, some FDs from NBFC’s such as Mahindra Finance FD or HDFC Ltd or Bajaj Finance FDs offer better interest rates on their fixed deposits in comparison to the banks.
It is important for seniors not go overboard and invest a sizable portion in them as they are relatively riskier than bank FDs. It is advisable to invest in a shorter term & to invest in highly reputed companies only.