There are plenty Best investment Plans for senior citizen India. But the most crucial part, which one strive for is safety, security with high interest rate and low tax.
Nowadays a lot of Monthly income scheme are floating in the market with low to high risk basket.
But again the key is safety, security and high interest.
In this blog post, we will discuss about best investment plans available for monthly income.
Table of Contents
Best Investment Plans for senior citizen in India 2023
Senior Citizen Saving Scheme (SCSS)
The Senior Citizen Saving Scheme is probably heaven for senior citizens in India. SCSS is a safe, secure 5-year GOI scheme with a fixed rate of interest.
| Scheme | Duration | Interest Rate | Interest Payment Frequency | Tax Benefit U/S 80 C | Interest Taxability | Premature withdrawal |
| Fixed Deposit | Any Duration | 5%-7% vary from bank to bank | monthly/ quarterly/ h.yearlyyearly | Only 5-year Fixed Deposit is eligible | Interest is added to income & taxed as per slab | Possible with penalties |
| Senior Citizen Saving Scheme | 5 year+3 year ( extension-optional)( max investment 30 lac) | 8% ( applicable from 1 Jan 2023) | Quarterly | For first-year only ( max limit 1.5 lac) | Interest income is exempt up to Rs 50000 ( all interest income from FD etc.). The rest amount is taxable | Possible with penalties |
| Pradhan Mantri Vaya Vandana Yojana | 10 year( max investment 15 lac)i | 7.4% Month;y | monthly/ quarterly/ h.yearly/ yearly | No tax benefit U/S 80C | Interest is added to income & taxed as per slab | In special circumstances with penalties |
| Post Office Monthly Income Scheme | 5 Year( max investment 9 lac in the single name) jointly 15 lacs | 7.1% | monthly income | No tax benefit U/S 80C | Interest is added to income & taxed as per slab | Possible with penalties |
| RBI Floating Rate Bonds | 7 years ( any amount) | 7.35% currently – ( NSC Interest rate+0.35%) | Half-yearly interest payment | No tax benefit U/S 80C | Interest is added to income & taxed as per slab | Can sell in Secondary market |
| SWP Mutual Fund | Any Duration | Liquid/Low duration Fund -5-7% | monthly/ quarterly/ h.yearlyyearly | No tax benefit U/S 80C | Interest is added to income & taxed as per slab( STCG) More than 3 years of LTCG will be applicable | Withdrawal possible with/without exit load |
SCSS is a five-year Government-sponsored savings scheme for individuals of the age 60 and above. The Government of India introduced this scheme in 2004, intending to provide regular and steady income to senior citizens in India.
SCSS account offers a competitive interest rate of 8% per annum to senior citizens. It is a safe scheme as it is backed by GOI.
Any Indian citizen 60 or above can buy SCSS Scheme through the post office, PSU banks, or and private banks also. ( bank list –https://bestinvestindia.com/senior-citizen-saving-scheme-scss/
you can deposit a maximum of 30 lakh rupees and take a quarterly payout from this money. The rate of interest in 2023 is the highest among the other fixed regular income schemes.
You can extend the scheme for the next 3 years after the completion of 5 years.
If you do not extend the scheme you will get your principal amount back.
You also get a deduction of 50000 in interest income ( interest income from all sources like Income from Fixed deposit or any other interest income).
Advantages of Senior Citizen Saving Scheme /SCSS
#SCSS Account has everything that a senior can ask for. Senior Citizen Saving Scheme offers you principal security, fixed income, and return back of your principal amount after completion of 5 years.
#Additionally, you also get an income tax deduction in the year you deposit money for Rs 1.5 lac U/S 80C.
Disadvantages of Senior Citizen Saving Scheme /SCSS
Although SCSS is a Golden Scheme, however, there are few disadvantages like- penalty on premature withdrawal –
You can close your SCSS account prematurely after the completion of one year. You get your money back after deduction of penalty.
After completion of 1 year – Penalty of 1.5% of the deposit amount
After completion of 2 years – Penalty of 1% of the deposit amount
Example: Mr. Satish deposits Rs 10 lac and he decides to close his account after completion of one year.
Then as a penalty, he will have to pay on
Rs 10 lac*1.5% =Rs 15000
If he takes the money back after completion of 2 years then he will pay Rs 10000.
SCSS interest is fully taxable in the hands of the recipient. TDS is also applicable if the interest amount is more than 50000 in a financial year. The interest income up to Rs 50000 is not taxable for senior citizens.
Additional : SCSS calculator https://www.youtube.com/watch?v=OTiK3Qmk20E&t=7s
2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)-
PMVVY or Pradhanmantri Vaya Vandana Yojana is a 10-year LIC scheme for Indian senior citizens.
You can deposit a maximum of 15 lakh Rupees in one name and take regular income on a monthly/quarterly/ half-yearly or yearly basis.
PMVVY is also a safe and secure LIC Scheme. You can buy it offline or online.
Premature withdrawal is possible in special circumstances only.
You can choose the frequency of pension at your convenience. However, the yearly pension amount is a little higher than the monthly option.
To watch the difference between SCSS and PMVVY : https://www.youtube.com/watch?v=M1VdjweXm0g&t=3s
Advantages of Pradhan Mantri Vaya Vandana Yojana /PMVVY
#PMVVY offers you high returns on your money.
#Additionally, it is backed by the LIC of India, and therefore the return is guaranteed.
#The rate of interest is fixed irrespective of the market and other fixed scheme interest rate changes.
Disadvantages of Pradhan Mantri Vaya Vandana Yojana /PMVVY
#Once you buy the policy you have limited access to your money. You can withdraw the entire amount in case of some special circumstances such as any life-threatening disease to the proposer, spouse, or dependents. You have to give a cause of withdrawal from the scheme and have attach relevant papers.
#You do not get any tax benefit under section 80c and interest income is also taxable.
Also read: https://bestinvestindia.com/pmvvy-vs-senior-citizen-saving-scheme/
3. RBI Floating-Rate Bonds
The central GOI has replaced 7.75% bonds with RBI floating rate savings bonds 2020 ( Taxable) scheme. These bonds are available from July 1, 2020.
This time these bonds will have a floating rate interest rate which will change periodically. This also means that the interest rate will change with time.
The interest on the bonds will be payable at half-yearly intervals on Jan 1st and July 1st every year. There is no option to pay interest on a cumulative basis.
The interest rate will be reset starting from Jan2021 and thereafter every 1 July and 1 January. Right now the first coupon rate is fixed at @7.15%.
The interest rate in the future will be linked to the NSC interest rate +0.35%. If you want to redeem before completion of 7 years then special eligibility conditions apply.
If you are in the age bracket of 80 years or above, you can redeem after a Lock-in period of 4 years.
Age bracket 70 to 80 years, after the lock-in period of 5 years, and if you are in 60 to 70 years then you can withdraw after 6 years
#Penalty charges @ 50% of last coupon payment.
Please watch : https://www.youtube.com/watch?v=4jxQwpqO6-0&t=43s
Advantages of RBI Floating-Rate Bonds
The biggest advantage is safety and guarantee of RBI, Floating interest rate and interest rate is higher as compared to PO NSC. You can take regular income from RBI bonds.
#Additionally you can invest any amount you wish to. You will get your money back after completion of duration.
Disadvatage of RBI Floating-Rate Bonds
- Lock-in( for age lesser than 60 Yrs) of 7 years that means you cannot withdraw before completion of 7 years
If you are in the age bracket of 80 years or above, you can redeem after a Lock-in period of 4 years.
Age bracket 70 to 80 years, after the lock-in period of 5 years, and if you are in 60 to 70 years then you can withdraw after 6 years
#Penalty charges @ 50% of last coupon payment.
- The income received is taxable in nature
4. Post Office Monthly Income Scheme ( PO MIS)
Post Office Monthly Income scheme is a Five-year monthly income scheme. It is a 100% safe and secure scheme. The maximum deposit is only Rs 9 lakh in one name.
However, you can invest up to Rs 15 lakh jointly with your spouse. After completion of 5 years, you get back your invested money.
Although, you are free to reinvest this money again in the same scheme.
The current rate of interest is 7.1%. The interest is credited to your account on monthly basis.
Advatage of Post Office Monthly Income Scheme ( PO MIS)
POMIS is safe Govt. backed scheme,one can rely on. Additionally this scheme give fixed rate of interest on monthly basis. Any age group person can invest in this scheme.
Disadvantages of Post Office Monthly Income Scheme ( POMIS)
#In case of premature withdrawal you have to pay a penalty.
#Secondly the income generated from PO- MIS is 100% taxable in nature and you also do not get any kind of tax advantage ( such as deduction U/S 80 C ).
#The money deposit limit is also quiet low.
5.SWP Mutual Fund
A systematic withdrawal plan is the best way to take income from mutual funds.
SWP plans allow investors to withdraw from their MF investments at a regular interval.
Here you can choose withdrawal frequency. You can withdraw on a monthly/quarterly/half-yearly or yearly basis.
You can also choose to withdraw capital gains only and keep your principal money intact.
To gain maximum advantage through SWP mode, you can invest a certain amount in liquid/low-duration funds. Get assured fixed amount withdrawal for 5-10 years duration and invest the rest of the money in a mix of debt mutual funds, balanced funds, and diversified equity mutual funds.
Additional : SWP Mutual Fund Calculator – https://www.youtube.com/watch?v=0X-Lo7gBNTo
What you can expect from this option:
- You can expect rate of interest approx 7%-8% from this option if you opt for safer option like liquid mutual fund or low duration mutual fund or 7%-10% if opted for Debt balanced/dynamic asset allocation funds.
- Here you should be mentally prepared to have fluctuated maturity value.
- Little risk involved in the scheme. It is not 100% safe as Govt. Schemes.
- Rate of interest/return is not fixed such as Govt. schemes.
- Usually interest is little better than fixed deposits or at par with it.
- Money Payment starts from next month from date of deposition as it takes a month to set up a SWP.
Read mopre about SWP https://bestinvestindia.com/how-mutual-fund-swp-works-what-is-swp/
Conclusion
These are the few best investment options for regular income in India. However, Income Planning from your corpus should be exercised with great caution because one silly mistake may make your life stressful. Please consider all investment options for income generation.
Additional Reading
LIC Saral Pension Plan – Lifetime pension yojana
- https://bestinvestindia.com/rbi-floating-rate-savings-bonds-2020/
- https://bestinvestindia.com/senior-citizen-saving-scheme-scss/
- https://bestinvestindia.com/pmvvy-vs-senior-citizen-saving-scheme/
- https://bestinvestindia.com/top-5-post-office-tax-saving-scheme/
- https://bestinvestindia.com/how-mutual-fund-swp-works-what-is-swp/
- https://bestinvestindia.com/difference-between-sip-swp-and-stp/
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