Aditya Birla Sun Life Mutual Fund

Best Investment Options for the Retired - Senior Citizen Savings Scheme (SCSS) - ABSLMF Blog

Senior Citizen Day can be an empowering one if finances are managed well!

Aug 22, 2018
5 mins | Views 939

Remember the long story telling sessions with your Grandparents were a true joy in childhood?

How about we take a moment to celebrate Senior Citizens Day for the love of our grandparents?

Retirement has its own charm. Free of most responsibilities, this phase is all about small joys of life. Family time, holidays, social work, etc. replace the hectic day to day life to usher a new-found freedom.

There are many benefits available for senior citizens to make their post retirement journey merrier. Moreover, right investment choices can make them financially capable to live it up. Let’s have a look at few special benefits & investment options available for senior citizens.

Senior Citizen Investment Options: Senior Citizen Savings Scheme (SCSS)

  • 5 year Deposit Plan; can be extended by 3 years
  • Available at : Nationalized Banks & Post Offices
  • Current rate of return : 8.3% per annum
  • Interest Payout : Quarterly
  • Deposits up to Rs. 1.5lakhs eligible for tax deduction u/s 80C
  • Maximum Investment Limit – Rs. 15 lakhs per senior citizen
  • Taxability : Under section 80TTB interest earned up to Rs. 50,000 p.a. from all kinds of bank & post office deposits is exempted. Any Interest earned above this limit is taxable as per the investor’s applicable tax slab rate

Senior Citizen Investment Options: Pradhan Mantri Vaya Vandana Yojana

  • Launched in 2017; open for investment till March 2020
  • Tenure : 10 years
  • Available Online and Offline through Life Insurance Corporation of India (LIC)
  • Current rate of return : 8 – 8.3% per annum depending upon the chosen interest payout option
  • Interest Payout : Monthly, Quarterly, Half Yearly and Annually
  • Not eligible for tax deduction u/s 80C
  • Maximum Investment Limit – Rs. 15 lakhs per senior citizen
  • Taxability : Interest earned is taxable as per the investor’s applicable tax slab rate

Senior Citizen Investment Options: Bank Fixed Deposits

  • Tenure: Flexible up to 10 years
  • Available at : All Banks
  • Interest Rate : 0.25 - 0.5% higher than regular FD rates
  • Current rate of return: Differ from bank to bank. Approx 7-7.6% p.a. for a 5 year FD
  • Interest Payout : Monthly, Quarterly, Half Yearly Annually
  • 5 year Tax Saving FD of up to Rs.1.5 lakhs p.a. eligible for tax deduction u/s 80C
  • Maximum Investment Limit – No Upper Limit
  • Taxability: Under section 80TTB interest earned up to Rs. 50,000 p.a. from all kinds of bank deposits is exempted. Any Interest earned above this limit is taxable as per the investor’s applicable tax slab rate

Senior Citizen Investment Options: Debt Mutual Funds

  • Rate of Return: Market Linked. Aim to provide tax efficient returns
  • Debt Funds: Low Risk. Relatively stable returns. Provide Liquidity. Aimed at capital preservation. Regular income can be generated by opting for systematic withdrawal plan in these funds.
  • Taxability: Tax efficient returns as compared to traditional investments. Senior citizens falling under highest income tax bracket can consider these funds for higher post tax returns.

Senior Citizen Investment Options: Hybrid Mutual Funds

  • Rate of Return: Market Linked. Aim to provide tax efficient & inflation beating returns
  • Hybrid Funds: Moderate Risk. Mix of debt and equity investments. Aim at providing inflation beating returns by investing a portion in equities. A small portion of your portfolio could be invested in these funds for long term with an aim to beat rising inflation.
  • They also aim to provide you regular income in form of dividend payouts. But dividends are not assured and are subject to availability of distributable surplus.
  • High net worth (HNIs) senior citizens with surplus funds and long term investment horizon (at least 5 years) can consider investing a certain %age of their portfolio in aggressive hybrid schemes.
  • Taxability: Tax efficient returns as compared to traditional investments

Senior Citizen Investment Options: Reverse Mortgage

  • Under this scheme you mortgage self owned house to the bank, and get a loan which comes to you as regular payouts. Its aim is to provide steady income to senior citizens without taking away the right to stay in their home.
  • Rate of return: Depend upon the loan tenure differ from lender to lender
  • Tenure: 10 to 20 years; depends on the age of borrower.
  • On death, legal heirs can keep the house by repaying the loan with interest. Else, bank can sell the house to recover the dues and pay the remaining to the legal heirs.
  • Taxability: Regular payments received from lenders/banks are exempted from tax. But whenever the property is sold by lender/borrower/legal heirs then it will be taxed accordingly
  • Lack of awareness, low payout, lack of understanding, complex process of borrowing are few reasons for it being not very popular

Benefits - Taxation for Retired

  • Income of up to Rs 3 lakh is non-taxable.
  • For super senior citizens (over 80 year of age), income of up to Rs 5 lakh is non-taxable.
  • Higher deduction of up to Rs. 50,000 under Section 80D of Income Tax Act 1961 for Health insurance premium.
  • Higher deduction of up to Rs 100,000 for senior citizens for treatment of specified diseases under Section 80DDB.

Benefits - General for Retired

  • Few Airlines provide 50% discount on economy fare for domestic travel to senior citizens with Indian citizenship, who are over 60 years of age.
  • Men over the age of 60, and women over the age of 58 are eligible for 40% and 50% discount respectively on fares of all classes of all trains.
  • Some municipal corporation and state governments give concession to senior citizens on bus fare. Certain bus seats are also reserved for them.
  • Certain telephone service providers give priority to senior citizens for registration of telephone and discounts are offered on installation charges as well as monthly service charges.

So this Senior Citizen Day, make sure to share a SMILE!

For more details please refer the below sources,

https://economictimes.indiatimes.com/wealth/plan/here-are-all-the-benefits-available-to-senior-citizens/articleshow/58655579.cms

https://www.livemint.com/Money/QQ60Q8MWtWCfSE5QFBNO8O/How-to-get-regular-income-after-retirement.html

The above Investment Options are general in nature and for information purposes only. Investors are requested to consult their financial planners/advisors for more investment avenues.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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