Investment Avenues for Senior Citizens


Over the past few days, the banks and the government of India have launched several investment schemes with high-interest rates for senior citizens. It started with SBI introducing ‘SBI We Care’, a special fixed deposit for the elderly, followed by HDFC with their ‘Senior Citizen Care FD’. Both schemes offer an interest rate of 6.5% per annum for a term of 5-10 years. A couple of days later, the Union cabinet revived the Pradhan Mantri Vaya Vandana Yojana (PMVVY) with a 10-year term offering an interest rate of 7.4%. ICICI offers ‘Golden Years FD’ at an interest rate of 6.55% with a term of more than 5-10 years.

The Senior Citizen Savings Scheme (SCSS) is a government-backed savings instrument for senior citizens over the age of 60, offering an interest rate that is the same as that offered in the PMVVY scheme (7.4%). The difference however, is regarding the maturity period of 5years, whereas PMVVY has a 10-year term. This scheme can be availed through private/public sector banks. According to ITA 1961, investment under this scheme is eligible for a tax deduction of up to 1.5 lakhs per annum.

The PMVYY scheme is directed and managed by LIC, guaranteeing a payout of pension at a specified rate for 10 years. The rate of interest for the current financial year is 7.4%, which is lower than the previous rate of 8%. The interest rate is subjected to subsequent revision every year in line with SCSS rates and is fully taxable.

The government of India’s savings bond also known as the RBI bond comes with an interest rate of 7.75%, has a term of 7 years, and open to Indian citizens only. The interest rates are computed annually but payable on a half-yearly basis and are taxable. These bonds can be only held in Demat form and availed from nationalized banks, and certain NBFCs like IFCI ltd.

Debt mutual funds are an option for all those willing to sign up for greater risk and greater returns. The virtue of indexation makes debts funds attractive. Although they don’t assure fixed returns, they do come with a major tax advantage. The returns from selling a debt fund which is held for more than three years, are considered as long-term capital gains, and are taxed at 20% with indexation benefit.

What to choose?

As an investor, it is advisable to analyze the prospects and risks associated with financial products and then spread investments across different instruments rather than focusing on a single one. Prepare a portfolio with the assistance of experienced and knowledgeable market speculators to reap greater profits.


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