Savings scheme

Tax savings for seniors | Savings Plan for Seniors vs PMVVY: Knowing the Best Investment Option for You

Savings Plan for Seniors vs PMVVY: Knowing the Best Investment Option for You

New Delhi: Seniors have become the biggest victim of this drop in repo rates as FD bank rates have fallen.

As seniors mainly depend on their own income, their income has dropped by up to 30% over the past year, making it difficult to manage their expenses.

In such a situation, seniors need to ensure that their money is used optimally.

Pradhan Mantri Vaya Vandana Yojana (PMVVY) and Senior Citizen Savings Scheme (SCSS) are preferred fixed income options for senior citizens. The central government supports both schemes, and they offer better long-term returns compared to other safe options.

Both programs are intended for people aged 60 and over. The SCSS offers age-related relaxation in certain cases. For example, retired employees over 55 and under 60 can invest in it, provided that the investment is made within one month of receiving pension benefits.

Senior savings

One can invest a maximum of Rs 15 lakh in SCSS in multiples of Rs 1,000. Interest in this scheme is payable quarterly so that it can meet the regular income requirement. The SCSS account matures in five years, after which it can be extended once for a block of three years.

Despite a sharp reduction in interest rates from small savings schemes, SCSS is still offering a rate of 7.4% for the current July-September quarter, well above any other fixed-return scheme available to seniors. At SCSS, seniors must pay a penalty for pre-closing.

SCSS is eligible for a deduction under Section 80C. Interest income received from SCSS is eligible for a tax deduction under Section 80TTB.

According to the section, an elderly person can obtain a deduction of Rs 50,000 on interest earned on term deposits (from eligible banks).

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The pension plan has a duration of 10 years and the pensioner can choose a monthly, quarterly, half-yearly or annual retirement mode.

Now, the interest in Pradhan Mantri Vaya Vandana Yojana (PMVVY) is higher than the fixed deposit system offered by SBI. The plan will offer an assured rate of return of 7.40% on a monthly interest payment basis. If you invest in this pension plan during the year, the return of 7.40% will be locked in for the full ten year term.

Anyone aged 60 or over can benefit from the benefits of the Pradhan Mantri Vaya Vandana Yojana (PMVVY) program. The maximum investment allowed in this scheme is Rs 15 lakh. This retirement plan is marketed by Life Insurance Corp. of India.

Accounts may be closed prior to maturity. In PMVVY, an elderly person gets 98% of the purchase price. No tax deduction is available under PMVVY. The PMVVY payment is also taxable.

In most aspects, the SCSS score is superior to the PMVVY. However, if you want a monthly payment, the latter is preferable.


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