Investments for Monthly Income
1Bank Fixed Deposits (FD) and Recurring Deposits (RD)
Senior citizens can avail of 0.5% higher interest rates on bank FDs and RDs than normal rates. Section 80 TTB of the Income Tax Act has made the interest on income up to Rs. 50,000 per annum tax-free for older adults. This includes interest on bank FDs and RDs, post office FDs and RDs, and savings account.
2Post Office Fixed Deposits (FD) and Recurring Deposits (RD)
Post Office FDs and RDs are similar to bank ones with an additional level of safety. The money from the post office savings goes directly to the government and hence, there is no possibility of default. Post office savings are free from TDS (tax deducted at source) deductions, unlike bank FDs and RDs. The post office also has a monthly income scheme called the Post Office Monthly Income Scheme (POMIS) which gives monthly income.
3Senior Citizens Savings Scheme (SCSS)
The SCSS is a savings scheme implemented by the government. As the government holds the money, this saving is more secure than bank FDs. SCSS has a tenure of 5 years and can be extended by another 3 years. SCSS has an interest rate of 8.7%, payable quarterly. All older adults above the age of 60 can avail of this scheme from any bank or post office.
4Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is a type of pension implemented by the government in partnership with the Life Insurance Corporation of India (LIC). It has a tenure of 10 years and provides an interest of 8%. The interest under PMVVY is fully taxable. PMVVY is a safe scheme for saving because of the involvement of LIC.
Investments for Growth
5National Pension System (NPS)
NPS is a scheme originally introduced for government employees. Under this scheme, an employee in the age group of 18-65 years has to deposit a certain amount every month throughout his/her working life. This amount is invested in equity and debt funds according to the investor’s choice. An older adult can withdraw this money after retirement. There is no fixed interest rate for NPS savings; however, your money grows faster than equity funds. NPS can be extended by an individual up to the age of 70 years. There are separate NPS schemes for private-sector employees and low-salary employees as well.
Some life insurance policies provide income along with providing life cover. Unit Linked Insurance Plans (ULIPs) and Endowment Plans are some such insurance schemes. While investing in these policies, you should carefully calculate the charges (premium allocation charge, policy administration charge, fund management charge, mortality charge) and select the one that is the lowest/cheapest.
Mutual fund investment is a good way to tackle inflation. However, investing in a proper mutual fund could seem very difficult. Older adults can invest in mutual funds of a general nature with high investment returns. Large-cap funds are low risk and low return while mid- and small-cap funds are high-risk high returns. Consult a financial planner to decide which funds you can invest in and invest wisely.
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