Savings scheme

Best investment options for seniors: Senior Citizen Savings Scheme (SCSS), Fixed Deposit to GoI Bonds during COVID19

The financial lives of older people have been affected by the coronavirus outbreak and the lockdown that followed, as they typically manage their investments through visits to banks or post offices.

Best investment options for seniors during the coronavirus pandemic: The financial lives of older people have been affected by the coronavirus outbreak and the lockdown that followed, as they typically manage their investments through visits to banks or post offices. Here are some investment options that a senior can consider:

GoI Savings Bonds
Indian Government Savings Bonds (Taxable GoI Bonds) are also known as RBI Bonds. Sovereign guarantees back these bonds and carry an interest rate of 7.75%. The plan has two options: the non-cumulative option where interest is paid semi-annually and the cumulative option which pays interest at maturity.

There is no cap on the amount that can be invested in these bonds, but profits are taxed according to the income tax bracket. The blocking period for investors in the 60-70 age group is six years, while it is five years for those aged 70-80. The blocking period for people over 80 is only four years. Premature bond buybacks are only allowed on August 1 and February 1 after the end of the minimum lock-up period. The penalty for premature redemption of bonds is 50% of the interest due for the last six months of the holding period.

Term deposits with banks
Bank Term Deposits (FDs) offer a fixed interest rate over the life of the investment that varies from bank to bank. Seniors benefit from a higher interest rate of 0.25% to 0.5%. The interest rate is revised periodically, but amid unprecedented developments, banks have been forced to lower interest rates on bank deposits. This has affected the elderly as they mainly depend on interest income from their bank deposits.

Debt Fund
Debt funds are a category of mutual funds that invest in high quality fixed income securities such as treasury bills, government and corporate bonds, etc. Seniors can invest in liquid funds and overnight funds, as they offer high liquidity and security. . The returns on debt funds are taxed according to the income bracket.

Seniors Savings Plan (SCSS)
SCSS is a government savings plan that provides a steady stream of income and a means to save taxes under Section 80C. The minimum investment in a SCSS account is Rs 1,000 while the maximum is Rs 15,000,000 across all accounts. You are allowed to open a joint account with your spouse, who is also an elderly person. SCSS accounts have a five-year lock-in period and can be extended for three years at maturity. Premature withdrawals are allowed after one year. However, if you happen to close the account after one year, but within two years, the pre-close fee is 1.5% of the deposited amount. If you withdraw after two years, the penalty is 1% of the amount deposited.

Note: You cannot open an SCSS account online. For this you need to go to the nearest bank branch or post office.

Company deposits
Business deposits offer a higher rate of interest than bank term deposits. Seniors are advised to invest only in business deposits rated AAA and above.

The writer is founder and CEO of ClearTax

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