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Regardless of age, one always has to make money work for them. With age being a major constraint for senior citizens, the need to choose the best investment in India is essential. Senior citizens have various investment options to choose from. But what suits one investor might not suit the other.

Hence it is important to understand the various investment options available to senior citizens before choosing the best investment plan for senior citizens in India. In this article, we have covered the best investment plans for senior citizens in India.

Below is the list of best investment options in India available for senior citizens.

Best Investment Plan for Senior Citizens in India

Investment OptionReturnsInvestment Amount
Senior Citizens Savings Scheme (SCSS)7.4% p.a.Min Rs. 1,000
Pradhan Mantri Vaya Vandana Yojana (PMVVY)7.4% p.a.Min Rs. 1,50,000
Post Office Monthly Income Scheme (POMIS)6.60% p.a.Min Rs. 1,500
Senior Citizen FD3% – 7% p.a.Varies between banks
Tax-Free Bond5.5%-6.5% p.a.NA
Mutual Funds10% – 15% p.a Market LinkedRs.100
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Plans that will help you to achieve your life goals across multiple time frames.

1. Senior Citizens Savings Scheme (SCSS)

Senior Citizens Savings Scheme (SCSS) is one of the post office savings schemes for senior citizens. The Government of India backs the scheme. It offers safety and regular income in the form of interest payments to its investors. The interest is computed very quarter and credited to the investor’s account. The interest rates are revised by the Ministry of Finance every quarter. The SCSS interest rate for January – March 2021 quarter is 7.4%.

The minimum investment amount for the scheme is INR 1,000 and a maximum of INR 15 lakhs. Senior Citizens Savings Scheme has a lock-in period of five years. Furthermore, investors can extend the scheme duration for another three years. Also, the investment into SCSS qualifies for tax deduction under Section 80C of the Income Tax Act, 1961. However, the interest income is taxable, and a TDS is deducted if the interest is more than INR 50,000. The investors can claim the tax benefit of INR 1,50,000 while filing their income tax returns.

Investors can prematurely withdraw their SCSS investments. However, they are subject to certain penalties. The penalty varies based on the tenure of the account. Premature withdrawals are only allowed after one year of account opening. For withdrawals within two years of account opening, attracts 1.5% penalty on the investment or deposited amount. Also, for withdrawals after two years of account opening, 1% penalty on the deposit amount is charged. In the case of the account holder’s death before the maturity, the account shall be closed and the proceeds shall be given to the nominee or heir.

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2. Pradhan Mantri Vaya Vandana Yojana (PMVVY)

Pradhan Mantri Vaya Vandana Yojana (PMVVY) is an investment scheme for senior citizens. It offers both retirement and pension benefits. Life Insurance Corporation (LIC), under the purview of the Government manages and operates the scheme. PMVYY offers a fixed return. The tenure of the scheme is for a period of ten years.

Recently the Government has announced a change in interest rate structure for the scheme. In the old version of the scheme, the interest rate was fixed for the entire investment duration. However, with the latest changes, the scheme’s interest rates shall be announced every year. The interest rate until March 31st, 2021, is 7.4% payable monthly. In other words, it is 7.66% p.a. for the entire duration of ten years. PMVVY pay regular pension at monthly, quarterly, or yearly intervals.

The scheme requires its subscribers to be of 60 years and above. The minimum deposit amount is INR 1,50,000, and the maximum is INR 15,00,000. Furthermore, one can avail a loan against their deposits. A loan of up to 75% of the purchase price can be taken after three years.

3. Post Office Monthly Income Scheme (POMIS)

India Post or the Department of Post (DoP) offers Post Office Monthly Income Scheme (POMIS). The Government of India backs this savings scheme. POMIS is a low-risk investment option and offers regular monthly income to the depositors in interest payments. The interest rates are revised every quarter, and for January – March 2021 quarter the rate is 6.60%. The scheme has a lock-in period of five years. Upon maturity, the depositor can either withdraw or reinvest the amount into the scheme.

The minimum deposit amount is INR 1,500, and the maximum limit is INR 4,50,000 per individual. However, in the case of a joint account, the maximum limit is INR 9,00,000. Furthermore, the POMIS account is transferable from one post office to another. Also, the scheme allows premature withdrawals after one year of account opening. However, premature withdrawals come with a penalty.

4. Senior Citizen FD

Senior citizen fixed deposits FD are traditional investment products. Bank fixed deposits are the most preferred investment options as they offer a fixed return. These are considered low-risk investments as the returns are guaranteed in the form of investment. The FD interest rates ranges between 3%-7%. Moreover, banks pay a preferential FD interest rate to senior citizens. Senior citizens get up to 0.5% additional interest on their fixed deposits FD. One can calculate their potential returns from bank FD investments using a bank FD calculator. Scripbox FD calculator is a free tool available online to determine the returns from bank fixed deposits.

Senior citizens can choose the interest payment intervals. They can choose between getting interest payment regularly or at the time of maturity. For regular interest payments, they can choose between monthly, quarterly, half-yearly and annual intervals. Investment in tax-saving FDs is eligible for tax savings under section 80C of the Income Tax Act, 1961. The investors can claim the tax benefit of INR 1,50,000 while filing their income tax returns. The interest income is taxable at the individual investor’s income tax slab rate. And if the interest income exceeds INR 50,000, the bank will cut TDS of 10%. Investors can estimate their tax liability using an income tax calculator. Scripbox income tax calculator will help in estimating the taxable income and tax liability.

Moreover, bank deposits are liquid investments as there is a premature withdrawal facility available with a penalty. Additionally, banks also offer loans against FDs. Since the interest rates are low, investors have to invest a substantial amount in receiving a considerable income in the form of interest. However, bank deposits are the safest investment options available for senior citizens.

5. Tax-Free Bond

Tax free bonds are issued by government infrastructure organizations like NTPC Limited, Housing and Development Corporation, NHAI, and Indian Railways Finance Corporation. The tenure of the bond is above ten years. Moreover, the investment has a lock-in period until maturity. The interest for these bonds ranges between 5.5%-6.5%. The bond issuer pays interest annually, and the entire interest amount is tax-free.

Tax free bonds are low-risk investments as the schemes are backed by the Government. Hence the chances of default are low. Moreover, the scheme offers capital protection and promises regular income in the form of interest payments. Hence it is an ideal investment option for senior citizens.

Though there is a lock-in period, investors can sell the bonds on the stock exchange. The returns from the bond depend on the purchase price as these trade in low volume. The gains from the sale of bonds are taxable under Section 112. If the bond is sold before completing one year, the gains are taxable as per investor’s income tax slab rates. Suppose the bond is sold after one year. In that case, the long term capital gains will be taxable at 10% without indexation benefit and 20% with indexation benefit.

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6. Mutual Funds

Mutual funds are investment vehicles that pool money from multiple investors with similar objectives and invest in equities and debt securities. There are various categories of mutual funds, namely equity funds, debt funds and hybrid funds. Equity mutual funds majorly invest in equities, while debt funds invest in debt and money market securities. Hybrid funds invest both equity and debt securities. Senior citizens can align their goals with the fund’s objective and choose the right one.

In mutual funds, investors can not only invest monthly through SIP. They also have an option to withdraw their investments at regular intervals through SWP. Systematic Withdrawal Plans (SWP) allows investors to withdraw from their mutual fund investments at regular intervals. Investors can choose to withdraw a fixed or variable amount monthly, quarterly, half-yearly or annually. Investors can choose to withdraw just the capital gains, keeping their capital intact. Moreover, they will have to pay capital gains tax only on the withdrawn amount. Hence SWP not only provides regular income but is also tax efficient.

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As investors near their retirement age, most of their financial responsibilities have been completed. Also, most of them would’ve planned for retirement. All they need is an additional source of regular income to compensate for the loss of income post-retirement. Moreover, they also need to think about growth in the form of capital appreciation.

At this stage, investors are not willing to take any additional risk to earn an extra rupee. However, some investors have a high-risk tolerance even at the age of 60. For senior citizens, the best investment scheme will help earn a regular source of income and aid in gaining from the growth of the capital.

Hence senior citizens should choose the best investment options in India that suit their requirements. With the knowledge of the various investment options available, financial experts recommend that investors make informed decisions.

Related Reads

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2. Best Investment Plan in India for Middle Class

3. Best Mutual Fund to Invest in India

4. Best Tax Saving Plans

5. Best Equity Mutual Funds to Invest in 2021

6. Best Retirement Plans

7. Government Schemes 2022

8. Best Investment Options for Women

9. Best Investment Plans for 1 Year

Frequently Asked Questions

Who is eligible for senior citizen?

According to Indian Law, a senior citizen is a person who is a citizen of India and has attained the age of sixty years or above. A person between the age of 60 years to 80 years is considered a senior citizen. And, above 80 years, they are known as super senior citizens.

What is the interest rate in the post office for senior citizens?

The post office FD rates for senior citizens range from 5.50% – 6.70% p.a. for the tenure ranging between 7 days to 5 years. The interest rate for the Senior Citizens Savings Scheme is 6.60% p.a.

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