Elders are a wealth of information and their experiences are a great learning for both the young and the economy as a whole. It is also imperative that our elders should be financially independent. And not be dependent on anybody. Savings are essential for them so that their medical and travel expenses can be taken care of. Economists say that the geriatric population in India is predicted to grow as life expectancy increases. Statistics show that by 2050, the old population will make up around a quarter of the entire population. Medical bills become more difficult to manage as income declines in retirement. To favour the elderly, Indian government has come up with five important schemes.
Senior Citizen Saving Scheme (SCSS)
SCSS is a five-year scheme that allows you to register multiple accounts, but the total amount you can invest in all of them is capped at Rs 15 lakh. The government sets the interest rate on this scheme every quarter. SCSS will give 7.4 percent per year for the current April-June quarter. You will receive the interest rate for the full five-year period if you participate in this scheme. Interest generated in a Senior Citizen Savings Scheme, on the other hand, is completely taxable as “Income From Other Sources.” SCSS suits older citizens looking for a high fixed rate of return and a consistent income on a quarterly basis, thanks to the high interest rates and sovereign guarantee of principle amount.
Post Office Monthly Income Scheme (POMIS)
POMIS is similarly a five-year scheme, with the interest rate remaining constant until the maturity date. The interest rate on this scheme is set at 6.6 percent per annum for the current April-June quarter. A maximum of Rs 4.5 lakh can be placed in a single name account, whereas a maximum of Rs 9 lakh can be deposited in a joint name account. This arrangement pays out interest on a monthly basis, as the name implies.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
This scheme has been extended up to March 31, 2023. At present, the scheme is providing guaranteed pension at 7.40% per annum payable monthly. However interest rate on this scheme will be reset on April 1 every year and accordingly, the pension amount will change based on the new rate. The annual reset of the assured rate of interest will be in line with the revised rate of returns of SCSS but up to a ceiling of 7.75%. Once this threshold is achieved, a fresh appraisal of interest rate will be done. Maximum investment allowed in this 10-year investment scheme is Rs 15 lakh. On completion of the 10-year tenure, the principal amount along with the last instalment of pension will be returned to the purchaser.
Floating Rate Savings Bonds
The Floating Rate Savings Bonds 2020 has a tenure of 7 years and interest rate on this scheme will change every six months and is linked to the interest rate paid on National Saving Certificate (NSC) plus 35 basis points spread. Interest on this scheme is paid twice in a year- on January 1 and on July 1. At present, the scheme fetches 7.15% interest, which is fully taxable in the hands of the receiver. There is no upper limit for investment in this scheme.
Bank fixed deposits (FD)
Bank fixed deposits have always been the most popular investment scheme for senior citizens. But of late these schemes have lost their charm because of falling interest rates. Bank FDs provide the flexibility to choose your desired payout option-monthly, quarterly, half-yearly or annually. At present most of the large banks are providing up to 6% interest on FDs to senior citizens for a tenure between 5-10 years. However, some of the small finance banks and co-operative banks are providing more than 7% interest rate on senior citizen FDs.
(Geeta Chandrasekharan is the founder of Powerfulteachers.com, an organisation that works for the elderly)
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