If you are a senior citizen, a retired person, or a conservative investor, you might be looking for some investment plans that can provide you with regular income, safety of capital, and tax benefits. There are many options available in the market, but not all of them may suit your needs and risk profile. In this blog post, we will discuss some of the best investment plans for senior citizens in India that can help you achieve your financial goals and secure your future.
Before we dive into the details of each plan, let us first understand some of the factors that you should consider while choosing an investment plan as a senior citizen:
Choose the Best Investment Plan as a Senior Citizen
- Your age and life expectancy: As you grow older, your risk appetite and investment horizon may change. You may want to invest in plans that offer liquidity, stability, and guaranteed returns rather than high-risk and high-reward options.
- Your income and expenses: You should have a clear idea of your monthly income and expenses, and how much you can save and invest. You should also factor in inflation and rising medical costs that may affect your budget in the future.
- Your tax liability: You should be aware of the tax implications of different investment plans and choose the ones that offer tax benefits or minimize your tax burden. You should also consult a tax expert if you have any doubts or queries regarding your tax situation.
- Your financial goals and objectives: You should have a clear vision of what you want to achieve with your investments, such as creating a retirement corpus, generating regular income, leaving a legacy for your heirs, etc. You should also prioritize your goals and allocate your funds accordingly.
There are a number of different approaches to execute the above points in your plan, but the most important thing is to do it on a regular basis. If you don’t have the time or expertise to do it yourself, you can always seek the assistance of a professional portfolio management service.
Now that we have covered the basics, let us look at some of the best investment plans for senior citizens in India.
The Best Investment Plans for Senior Citizens in India
- Senior Citizens Savings Scheme (SCSS): This is a government-backed scheme that offers a fixed interest rate of 7.4% per annum (as of April 2021) for a tenure of 5 years. You can invest up to Rs. 15 lakh in this scheme and get quarterly interest payouts. The interest income is taxable as per your slab rate, but you can claim a deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. The scheme also allows premature withdrawal after one year with a penalty of 1.5% of the deposit amount.
- Pradhan Mantri Vaya Vandana Yojana (PMVVY): This is a pension scheme launched by the government for senior citizens aged 60 years and above. It offers an assured return of 7.4% per annum (as of April 2021) for a tenure of 10 years. You can invest up to Rs. 15 lakh in this scheme and get monthly, quarterly, half-yearly, or yearly pension payouts. The pension income is taxable as per your slab rate, but there is no TDS applicable on it. The scheme also provides a death benefit of the purchase price to the nominee and a loan facility of up to 75% of the purchase price after three years.
- Post Office Monthly Income Scheme (POMIS): This is a post office savings scheme that offers a fixed interest rate of 6.6% per annum (as of April 2021) for a tenure of 5 years. You can invest up to Rs. 4.5 lakh individually or Rs. 9 lakh jointly in this scheme and get monthly interest payouts. The interest income is taxable as per your slab rate, but there is no TDS applicable on it. The scheme also allows premature withdrawal after one year with a penalty of 2% of the deposit amount.
- Bank Fixed Deposits (FDs): These are one of the most popular and safe investment options for senior citizens as they offer guaranteed returns and liquidity. You can choose from various tenures ranging from 7 days to 10 years and get interest rates varying from 4% to 6.5% per annum (as of April 2021) depending on the bank and tenure. Senior citizens usually get an additional interest rate of 0.25% to 0.5% over the regular rates. The interest income is taxable as per your slab rate, but you can claim a deduction of up to Rs. 50,000 under Section 80TTB of the Income Tax Act. You can also opt for cumulative or non-cumulative FDs depending on your cash flow needs.
- Debt Mutual Funds: These are mutual funds that invest in fixed income securities such as bonds, debentures, treasury bills, etc. They offer higher returns than traditional fixed income instruments with lower risk than equity funds. They also offer better tax efficiency as the capital gains are taxed at 20% with indexation.
- Life Insurance Premiums: This is not an investment plan per se, but a way to secure your life and provide financial protection to your dependents in case of your demise. You can choose from various types of life insurance policies such as term plans, endowment plans, money-back plans, etc., depending on your coverage and maturity needs. The premium paid for life insurance policies is eligible for deduction up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. The maturity or death benefits are also tax-free under Section 10(10D) of the Income Tax Act.