Since age is a significant barrier for elderly persons looking to invest, selecting the ideal schemes for senior citizens is important. Choosing the ideal plan offering the maximum returns with the least risk can be tricky. Today, India provides an array of schemes for senior citizens and to choose the right one, keep these thumb rules in mind.
Let’s have a look at different schemes for senior citizens to understand their features and returns in a better way.
Senior Citizens Savings Scheme (SCSS) is one scheme provided by post office savings schemes supported by the Indian government since August 2004. It provides its investors with security and consistent profit in the form of interest payments.
The Ministry of Finance revises the interest rates of this scheme every quarter. The current interest rate of this plan is 7.4%. You can start investing with a minimum of Rs. 1,000 and a maximum of Rs. 15 Lakhs. This scheme has a maximum duration of 5 years. After that, you have the option to prolong it for another three years. However, renewing it is a one-time opportunity.
Additionally, this scheme allows you to withdraw your funds prematurely but will attract penalties. But premature withdrawal is allowed only after one year of the account opening. Withdrawals after one year of opening will attract a 1.5% penalty and 1% if it is after two years. The SCSS is classified as ETT (exempt-taxed-taxed), which means that although your contributed money is tax-free (under 80C), your interest earnings will be taxed according to your income tax bracket. Furthermore, TDS applies if your interest income exceeds Rs. 50,000 in a fiscal year.
The PMVVY was started in 2017. It is a retirement-cumulation pension program that is run and managed by LIC (Life Insurance Corporation).
It is an immediate annuity plan that pays you a predetermined payment every month once you deposit a lump sum of money in this plan. This senior citizen investing option was launched for the time duration of three years, from 4th May 2017 to 31st March 2020. Then, it was prolonged for a further three years, ending on 31st March 2023.
The minimum and maximum investment amounts are Rs. 1.5 Lakhs and Rs. 15 Lakhs, respectively. Furthermore, after three years, you can apply for a loan of up to 75% of the purchase price after completing three years in the scheme. This scheme pays a pension on a monthly, quarterly, or annual basis, with the current interest rate being 7.40%.
This plan comes under the ETT group. It means that while you are free from paying taxes on the amount you invested, the interest earnings are taxed according to your income tax bracket, and the amount you get at maturity is also subject to taxation. TDS is not deducted from this interest amount. Furthermore, section 80C does not provide a tax deduction advantage. However, you are exempt from paying GST for your purchase.
The government has introduced this scheme to provide an opportunity for senior citizens to earn a set monthly income after a certain period of time. Customers are required to make a one-time lump sum payment in this scheme, and in return, they will receive the funds in EMIs. This sum will be made up in part of the principal amount and the interest that is accumulated at quarterly rates.
You can start investing in SBI Monthly Income Scheme for Senior Citizens with a minimum deposit of Rs. 1,000 and a maximum deposit of Rs. 15 Lakhs. The current interest rate is 7.4%. This scheme's lock-in term is five years, although an account holder may extend it by an additional three years.
You can also claim tax advantages on earnings of up to Rs. 1.5 Lakhs under Section 80C. If the interest earned under this plan exceeds Rs. 50,000 in a fiscal year, it would be eligible for a TDS deduction.
It is one of the most lucrative government schemes for senior citizens in India provided by the finance ministry. It is a low-risk investment option that offers depositors a regular monthly income in the form of interest earnings.
The current rate of interest is 6.6%. The scheme has a five-year lock-in term. The minimum investment required to open a POMIS account is Rs. 1,500 and maximum investment is Rs. 3 Lakhs (for a minor account), Rs 4.5 Lakhs (for a single account), and Rs. 9 Lakhs (for a joint account).
The program also permits early withdrawals after the first year of account establishment. However, you are required to pay a penalty fee for the same. A penalty of 2% will be levied if withdrawal is between 1-3 years and a 1% penalty between 3-5 years.
There is no TDS on the profits gained by this scheme. After maturity, you will be required to pay tax on the principal amount received. Also, this 5-year POMIS investment is ineligible for Section 80C tax breaks.
This scheme was launched in May 2020. This plan was introduced with the aim of providing a better and more reliable source of income for senior citizens.
This is regarded as a low-risk investment since it offers guaranteed returns. The current interest rate goes up to 7.75%, which smaller banks are providing. Senior citizens receive an additional 0.50% interest on their fixed deposits. This scheme allows applicants to start an investment with a minimum of Rs. 5,000 (if opening an account online) or Rs. 10,000. (if opening an account at a bank branch). The maximum amount varies from bank to bank. The tenure of this scheme is 180 days for short-term deposits and 1, 3, and 5 years for long-term obligations.
This senior citizen investing option is classified as ETT. If you invest in the maximum 5-year lock-in tax-saving FD duration, you can claim a tax deduction of up to Rs 1.5 Lakhs under Section 80C.
Retirement planning has become a crucial part of the planning process as the luxury of getting pensions from companies back in the day has gone down. Adding to that, the inflation rates and standard of living are also increasing, making retirement planning all the more necessary. With various senior citizens schemes available, it is important to understand each one properly before you decide on investing in them.
Senior Citizens Savings Scheme (SCSS) is one of the top government schemes for senior citizens in India that the government launched in August 2004. It provides its investors with security and consistent profit in the form of interest payments. You can start investing with a minimum of Rs. 1,000 and a maximum of Rs. 15 Lakhs. This scheme has a maximum duration of 5 years.
The Indian government has introduced several schemes for senior citizens, including Pradhan Mantri Vaya Vandana Yojana, SBI Monthly Income Scheme for Senior Citizens, etc to provide a reliable source of income after their retirement. These schemes allow senior citizens to earn additional income, obtain tax benefits, and secure their future.