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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)8.00% p.a.Min Rs. 1,000
Pradhan Mantri Vaya Vandana Yojana (PMVVY)7.40% p.a.Min Rs. 1,50,000
Post Office Monthly Income Scheme (POMIS)7.10% p.a.Min Rs. 1,500
Senior Citizen FD3.5% – 8.95% p.a.Varies between banks
Tax-Free Bond5.5%-6.5% p.a.NA
Mutual Funds10% – 15% p.a Market LinkedRs.100

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 every quarter and credited to the investor’s account. The interest rates are revised by the Ministry of Finance every quarter.

  • Minimum Investment: INR 1,000
  • Maximum Investment: INR 15,00,000
  • Interest Rate: 8% (January – March 2023)
  • Lock In Period: 5 Years
  • Tax Saving: SCSS Investments qualify for tax deduction under Section 80C of the Income Tax Act, 1961
  • TDS: The interest income is taxable, and a TDS is deducted if the interest is more than INR 50,000.
  • Premature Withdrawal: Available, however attracts penalty. 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.

Check Out PMVVY vs SCSS

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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. The scheme requires its subscribers to be of 60 years and above.

  • Minimum Investment: INR 1,50,000
  • Maximum Investment: INR 15,00,000
  • Interest Rate: 7.40% (January – March 2023)
  • Lock In Period: No Lock in Period, however the policy terms in 10 years.
  • Loan Facility: Investor can avail a loan against their PMVVY 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.

  • Minimum Investment: INR 1,500
  • Maximum Investment: INR 4,50,000 per individual. INR 9,00,000 in case of a joint account.
  • Interest Rate: 6.60% (January – March 2023)
  • Lock In Period: 5 Years
  • Tax Saving: Doesn’t qualify for tax deduction.
  • TDS: No TDS.
  • Premature Withdrawal: The scheme allows premature withdrawals after one year of account opening. However, premature withdrawals come with a penalty.
  • Flexibility: POMIS account is transferable from one post office to another.

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.

  • Minimum & Maximum Investment: Varies from bank to bank
  • Preferential Interest Rate: The FD interest rates ranges between 3%-7%. Senior citizens get up to 0.5% additional interest on their fixed deposits FD.
  • Interest Payments: Senior citizenscan 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.
  • Lock In Period: Depends don’t on scheme.
  • Tax Saving: Investments in tax savings FDs qualify for tax deduction under Section 80C of the Income Tax Act, 1961.
  • TDS: The interest income is taxable, and a TDS of 10% is deducted if the interest is more than INR 50,000.
  • Taxation: The interest income is taxable at the individual investor’s income tax slab rate.
  • Premature Withdrawal: Bank deposits are liquid investments as there is a premature withdrawal facility available with a penalty.
  • Loan Facility: Available

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.

  • Tenure: The tenure of the bond is above ten years.
  • Lock-in Period: The investment has a lock-in period until maturity. Though there is a lock-in period, investors can sell the bonds on the stock exchange.
  • Interest: 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.
  • Risk 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.
  • Taxation: 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.

Start Exploring Mutual Funds

Conclusion

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

1. Best Investment Plans To Invest in 2023

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 2023

6. Best Retirement Plans

7. Government Schemes 2023

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% – 8% p.a. for the tenure ranging between 7 days to 5 years. The interest rate for the Senior Citizens Savings Scheme is 8% p.a.

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