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Best Investment Plan for Senior Citizens


Which is the best investment scheme for a Senior Citizen so that he can meet his monthly household expenses as well as grow more income from his current saving amount. This is very crucial question in mind of every senior citizen. Before explaining about any of the saving schemes, First you have to keep in mind is:

BUY BEST MEDICAL HEALTH PLAN

If you and your family are not covered under any medical health plan, then you must buy it first. Because it provides you and your family a financial support for medical treatment. Without any Insurance health plan, a sudden health issue can eat all your savings. Premium paid for medial health plan is covered under section 80D in which a deduction amount for senior citizens has now been increased from 30,000 to 50,000 in Budget 2018.

See the related post : Revised Interest Rates for Small Savings Schemes 3rd quarter 2018-19

1. SENIOR CITIZEN SAVING SCHEME (SCSS) -

Senior Citizen Saving Scheme is the best opportunity for senior citizens. The following persons are eligible for the said scheme:-

  1. Any person with the age of 60 years or above.
  2. An individual who has retired on superannuation or under VRS, at the age of 55 years or more but less than 60 years can also open account subject to the condition that the account is opened within one month of receipt of retirement benefits and amount should not exceed the amount of retirement benefits.
  3. Retired defense personal with the age of 50 years or above.

The interest earned from this plan can meet out your household expenses while the balance amount can be further invested in any other schemes also. SCSS account can be opened at post offices and banks. The maximum limit for investment is Rs. 15 lakhs irrespective of number of accounts, individually or jointly (in multiple of Rs. 1,000). Maturity period is 5 years, which can be further extended for three years. Premature closure is allowed after one year on deduction of an amount equal to1.5% of the deposit & after 2 years 1% of the deposit. Now the interest rate has been increased to 8.70% w.e.f 01.10.2018, earlier it was 8.30% from 01.04.18 to 30.09.2018. Interest credited to saving account on quarterly, half yearly or annually basis as per your choice. Interest received under this scheme is fully taxable. Investment under this scheme is eligible for tax benefit under section 80C.

2. MONTHLY INCOME SCHEME (MIS) -

Monthly Income Scheme is available in all post offices in India. In this scheme a fixed amount multiples of Rs. 1,500 can be invested. Maximum investment limit is Rs. 4, 50,000/- in single account and Rs. 9, 00,000/- in joint account.  An individual can invest individual or jointly maximum up to Rs. 4,50,000. Interest is received on monthly basis. The interest earned from this plan can meet out your household expenses while the balance amount can be further invested in any other schemes also. Principal amount is payable on maturity i.e. after completion of 5 years. Prematurely en-cashed can be done after one year or before 3 years at a discount of 2% of deposit amount and after 3 years at a discount of 1% of deposit amount. Now the interest rate has been increased to 7.70% w.e.f 01.10.2018, earlier it was 7.30% from 01.04.18 to 30.09.2018. Interest received under this scheme is fully taxable. Investment under this scheme is not eligible for tax benefit under section 80C.

3. FIXED DEPOSIT RECEIPTS(FDR) -

Fixed Deposits are highly yielding Term deposit and offered by all banks in India. FDRs are one of the most common savings used by many individuals. The main purpose of fixed deposit account is to enable the individuals to earn a higher rate of interest on their surplus funds. These are risk free and offer guaranteed returns. Under this scheme interest rate is higher than offered on normal saving accounts. Interest rate varies from bank to bank and period to period. Interest rate for senior citizens is higher than non senior citizens. Average rate of Interest received on FDRs vary between 5% to 9% subject to the conditions. Loan facilities can be taken against FDRs. Prematurely en-cashed can be done any time but the applicable rate of interest for the term the deposit has run. FDRs can be auto renewed after completion of tenure. The tenure can be from 15 days to 10 years. Interest received under this scheme is fully taxable. Interest received on FDR's is slightly higher as compare to Tax Saver FDRs. Investment in Tax Saver FDR's is only eligible for tax benefit under section 80C, which has a maturity period of 5 Years.

4. NATIONAL SAVINGS CERTIFICATES-VIII ISSUE (NSC) -

National Savings Certificates is fixed guaranteed income investment scheme. This can be purchased from any post office in India. The applicant can be Indian resident only. The Maturity period is of 5 years. No premature payment can be received exceptionally on the death of investor. Even you can invest the minimum amount of Rs. 100 and there is no maximum limit to invest in NSC. The maximum amount for deduction under section 80C is allowable up to Rs. 1,50,000The interest accrued on NSCs every year is also eligible within tax deduction limit. Now the interest rate has been increased to 8.00% w.e.f 01.10.2018, earlier it was 7.60% from 01.04.18 to 30.09.2018. The interest earned thereon is fully taxable.

5. MUTUAL FUNDS (MF) -

Mutual Funds are financial instrument which pools the money of different people and invest them in stocks, bonds, shares etc. There are three types of Mutual funds and mutual fund returns are market linked: -


1. Equity: These are high risk investments and earn higher returns.
2. Debt: These are low risk investments and earn low returns compared to Equity.
3. Balanced: These bear moderate risk and give moderate returns as its some portion is invested in Equity and some portion in Debt.

Mutual funds are managed by professional experts. You have to choose the right mutual funds. You can start investing in mutual fund schemes with a minimum amount of Rs. 500 or more. If you want to earn higher returns and having risk capacity then go to invest in Equity otherwise you have to choose invest in debt funds. Senior citizens have to go for investment under balanced fund.

6. Pardhan Mantri Vaya Vandana Yojna (PMVVY) -

Pardhan Mantri Vaya Vandana Yojna is a pension plan for senior citizens who are the ages of 60 years and above. LIC of India has been given the sole privilege to operate this scheme. The tenure under this scheme is 10 years. Under this scheme senior citizens will get a guaranteed monthly return of 8% per. The maximum amount can be invested of Rs. 15.00 lakh and minimum of Rs. 1.50 lakh individually. Under this scheme pension can be received on monthly, quarterly, half yearly or yearly basis as per your choice. Loan facility can also be availed after completion of 3 years. Premature facility can also be availed under treatment of any critical/terminal illness of self or spouse after deduction of 2% of Invested amount. On death of the policy holder during the policy terms, the full invested amount without any deduction shall be payable to nominee. Pension received is also taxable. Investment under this pension scheme is not eligible for tax benefit under section 80C.

WHICH ONE IS BEST SCHEME

As per my opinion, Senior Citizen Saving Scheme, Monthly Income Scheme & Pradhan Mantri Vaya Vandana Yojna are the best investment option to earn monthly income. However Senior Citizen Saving Scheme is a very good opportunity for senior citizens. This is an effective & long term saving option which offers security and features that are usually associated with any government-sponsored savings or investment scheme.

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VISHAL BANSAL 
on 08 November 2018
Published in Income Tax
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