The Government of India and the society show their munificence to senior citizens (aged above 60 years) by showering benefits in the form of higher deductions for income tax calculations, concessions on public transport, separate counters at banks and higher FD interest rate for senior citizens. Senior citizens can hope to secure their finances post their retirement through some attractive investment options.
Let’s look at some of these.
The Public Provident Scheme is one of the best schemes because of the tax-free income as well as tax benefits under Section 80C. You can invest up to Rs. 1,50,000 every year in the scheme. The scheme also offers partial withdrawal and loan facility. Besides, your money is safe. You can extend the scheme beyond its stated tenure of 15 years.
This is a special scheme for retiring employees wherein senior citizens like you can invest their retirement funds in the SCSS and earn the highest 8.6% interest (subject to change) provided you invest the amount within 1-month of retirement. The maximum amount you can invest in this scheme is Rs. 15 lakh for a 5-year tenure. Additionally, you can avail tax benefits under Section 80C for investment.
Banks offer fixed deposits that earn a decent income of up to 8.25% (IDFC FIRST Bank). FD interest rate for senior citizens is increased by 0.5% over and above the normal rate. Further, you can get tax exemption up to Rs. 50,000 in a year on the interest earned on the fixed deposits. You can enjoy the benefits of loans at nominal higher interest. You can also enjoy tax benefits.
Under this scheme you can invest in the scheme up to a maximum of Rs. 15 lakh and earn interest of 8% (subject to change) for the next 10 years at a monthly payout of Rs. 10,000. You can also avail a loan after a cooling off period of 3-years.
Under this scheme, you can invest up to Rs. 1,50,000 in the tax saving fixed deposit where the investment qualifies for Section 80C benefit along with other investments
Most insurance companies offer annuity schemes wherein you can deposit fixed amount and start receiving a monthly annuity immediately. You can opt for various options which include the return of investment option or guaranteed annuity for a specific period of time.
Mutual funds offer a variety of schemes with features that safeguard capital and maximize returns. You can invest in liquid funds, short-term debt funds and debt-oriented balanced funds to earn a decent income with low risk. You could consider a portion of the investment in the higher risk-oriented equity funds, which historically have given higher returns when invested for the long term.
The post office offers a monthly income plan which is safe and earns a decent return of 7.3% (subject to change). You can invest up to Rs. 4.5 lakh in a single name or Rs. 9 lakh in joint names for a lock-in period of 5 years. You will incur a penalty if you withdraw prematurely.
Post office savings schemes
You can open several post office savings schemes which include
All these schemes offer interest ranging from 4% to 8.3% and are safe instruments.
You can also invest in Unit linked investment plans (ULIP), which allow you to choose the instrument to invest in. Here, there is no guaranteed return but linked to the market. As such, you can invest if you have a higher risk appetite.
From time to time, governments introduce tax-free bonds. These bonds would be attractive to senior citizens who have taxable income in the 30% tax bracket.
You can also invest in senior citizen account which is a savings account which offers anywhere from 4 to 6% interest. These accounts are safe and earn a good but taxable income with high liquidity. You can also avail of some tax benefits.
This is an annuity plan with an investment between Rs. 63,960 and Rs. 6,39,610. You can redeem it after 15 years or earlier subject to some conditions. This plan offers a return of 8% payable monthly but taxable.
You can invest in Blue Chip company deposits to earn a slightly higher return than bank deposits. The income from these deposits is taxable. These deposits are relatively safe as companies with excellent track record offer these deposits.
There are many general schemes also available to senior citizens. Perhaps, you can invest in the schemes that offer higher FD interest rate for senior citizens and other special benefits only to senior citizens. Once you exhaust the limits set for investment and you have surplus funds you can invest in the general schemes. With careful planning and prudent investment, you can maximize your returns and at the same time enjoy liquidity and growth of capital by opening the appropriate senior citizen account.