Safe investments choices for senior residents throughout low rate of interest regime

With rates of interest coming down continually through the years, senior residents with restricted corpus discover it tough to make their each ends meet. This is particularly true when they don’t have any means to complement their revenue after retirement nor can they take any undue threat with their cash. We talk about the funding avenues that are secure and supply higher returns than mounted deposits of banks to senior residents.

Senior Citizen Savings Scheme (SCSS)

An particular person over 60 years can open a single or a joint account with partner, beneath this scheme, with any publish workplace or any designated financial institution. Non resident Indian (NRI) and individual of Indian origin (PIO) are usually not eligible to spend money on SCSS. Those who’ve taken voluntary retirement make investments their retirement corpus on this scheme even earlier than 60 years however after 55 years. Likewise, those that have retired from defence service, can even open account beneath SCSS anytime. In each the instances for opening account earlier than 60 years, the account must be opened inside one month from receipt of the retirement cash.

Under this scheme, you’ll be able to open a number of accounts throughout a number of years. However the utmost quantity invested mustn’t exceed 15 lakhs at any given level of time. The minimal quantity for opening an account beneath SCSS is 1,000/-. The account beneath SCSS has an preliminary tenure of 5 years which you’ll be able to lengthen as soon as for 3 years. You can withdraw cash after one 12 months however with a penalty.

The price of curiosity relevant for the accounts opened in the course of the present quarter is 7.4% which is legitimate for full tenure of 5 years. The price relevant is introduced each quarter for accounts opened throughout that quarter. Though the federal government had withdrawn notification to scale back the rates of interest on small saving schemes however ahead of later the charges will come down. So you need to lock in your cash with this rate of interest because the rates of interest are anticipated to return down. The fee of curiosity is made quarterly and the primary curiosity is adjusted in order to make all the next funds quarterly. Interest beneath SCSS is taxable and is topic to tax deduction at sources.

The quantity deposited beneath this scheme is eligible for deduction beneath Section 80C. This profit is important taking a look at the truth that different avenues beneath Section 80 C like life insurance coverage premium, college price for kids, fee in direction of pension plan, contribution to PPF account, ULIP, reimbursement of dwelling mortgage and so forth. are not workable or enticing for senior residents.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

In addition to the SCSS, senior residents have yet one more choice to lock of their rate of interest for subsequent 10 12 months for an additional 15 lakhs by investing in “Pradhan Mantri Vaya Vandana Yojana (PMVVY)”. This product ensures a pension at 7.40% p.a. if opted for month-to-month pay-outs for subsequent 10 years. You additionally produce other choices to obtain pensions at quarterly, half yearly and yearly intervals and the efficient price goes up accordingly. This scheme is open solely to resident Indian. It is managed by Life Insurance Corporation of India and might be purchased on-line in addition to offline.

Unlike SCSS there isn’t any tax profit for cash deposited beneath this scheme. There isn’t any provision for deduction of tax on annuity funds however the quantity of annuity obtained by you is taxable and you’ll have to discharge the tax legal responsibility your self. So in case you don’t want to avail the tax profit beneath Section 80C, this product is best than SCSS from liquidity perspective.

You can withdraw cash from this account earlier than completion of 10 years however solely beneath distinctive circumstances like for therapy of terminal sickness or crucial sickness of the partner or self however with 2% deduction from the principal quantity. You can even avail mortgage as much as 75% of the quantity deposited by you after three years. The quantity of curiosity on loans is adjusted in opposition to pension payable to you. Any quantity of mortgage remaining unpaid shall be adjusted in opposition to the principal payable.

RBI floating price financial savings bonds

After you’ve got exhausted restrict of 15 lakhs obtainable beneath SCSS and PMVVY every, you’ll be able to make investments your retirement corpus within the floating price financial savings bonds issued by the RBI with tenure of seven years. There isn’t any age restrict or the utmost quantity as much as which you’ll be able to spend money on these bonds. These bonds might be purchased on-line and offline by means of the authorised banks. These bonds have a tenure of seven years after which the identical are redeemed at face worth.

Any one that is a resident of India can spend money on these bonds. A resident who turns into a non-resident in a while is allowed to proceed to carry these bonds.

Unlike SCSS and PMVVY the place the speed of curiosity will get mounted for the complete tenure, the curiosity beneath these bonds retains floating and the curiosity for a half 12 months is introduced by RBI upfront. Presently the rate of interest is pegged at 0.35% larger than these payable on National Saving certificates (NSC). So any change within the curiosity on NSC shall routinely change the curiosity payable on these bonds. The curiosity on these bonds is taxable and topic to deduction of tax at supply.

Individuals between the age of 60 and 70 are allowed to go for untimely redemption of those bonds in the course of the seventh 12 months i.e. the final 12 months of the bond’s tenure. The particular person bond holder who’s between 70 and 80 can go for early redemption anytime after 5 years and for these above 80 years can go for redemption after the bonds have run for 4 years. The untimely redemption comes with a price.

The author is a tax and funding professional and might be reached at jainbalwant@gmail.com

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