Best Investment Options for Pensioners and Senior Citizens

Updated on: Dec 30th, 2022 - 2:56:22 PM

7 min read

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Retirement is an important stage in your life. Everybody, whether self-employed or salaried, expects to secure their lives post-retirement. This article discusses everything you need to know about various investment options post-retirement for senior citizens.


Latest Updates

Latest update:
The CBDT notifies Form 12BBA, a declaration form, to be submitted by the eligible senior citizens to the specified banks to take relief from filing the ITR.

In Budget 2021, it has been proposed to exempt senior citizens from filing income tax returns if pension income and interest income are their only annual income sources. Section 194P has been newly inserted to enforce that banks deduct tax on senior citizens of more than 75 years of age who have a pension and interest income from the bank.

An Ideal Portfolio

As an investor, you would expect your investment to provide you with a regular income as well as accumulate wealth for post-retirement life. While some investments offer only one of the benefits, some provide you with both.

In case you are a pensioner with a regular source of income, you might not need to focus on the first benefit. You can consider directing your portfolio towards mutual funds which grow over time to accumulate wealth for post-retirement life.

However, in the case of salaried or self-employed individuals who do not receive any form of pension, you might want to direct your portfolios towards investments that provide a regular income. Hence, it is advised to think over the type of investment portfolio you would like to have.

Investment Options for Regular Monthly Income

There are various investments that offer a regular monthly income. Here are some of the best investment options for senior citizens and pensioners: 

Recurring Deposits and Fixed Deposits

Fixed deposits (FD) and recurring deposits (RD) are one of the most common types of investments for retired individuals. Banks also offer a comparatively higher interest rate on FDs and RDs for pensioners. Under Section 80TTB of the IT Act, an interest income up to Rs 50,000 for senior citizens during a financial year is completely tax-free.

You can also consider investing in the Post Office Monthly Income Scheme (POMIS), which offers a regular monthly income. Though you can avail of tax benefits on investments up to Rs.1.5 lakh on tax-saver FDs that have a five-year maturity period, the interest income from the same is liable for taxation. 

Pradhan Mantri Vaya Vandana Yojana

The Pradhan Mantri Vaya Vandana Yojana (PMVVY) scheme operated by the Life Insurance Corporation (LIC) is a low-risk investment pension plan. It has a tenure of 10 years and it offered an interest rate of 7.4% in the previous year. However, only senior citizens above 60 years can invest in the plan on making a lump-sum investment.

The pension receivable under the scheme ranges from Rs 1,000 to Rs 10,000 per month depending on the amount you have invested. To avail of the scheme, you will have to make a minimum investment of Rs 1.56 lakh and not more than Rs 15 lakh on or before 31 March 2020. However, the scheme has been modified and extended up to 31 March 2023.

Keep in mind that investment made towards this scheme will not be eligible for tax deductions under Section 80C. However, the PMVVY scheme is exempted under Goods and Services Tax (GST).  Moreover, it offers an interest rate comparable with the senior citizen savings scheme (SCSS).

Senior Citizen Savings Scheme (SCSS)

SCSS is an excellent investment option for senior citizens looking for long-term saving schemes which offer security with additional benefits. You can avail of the scheme from post offices and recognised banks around the country.

Not only is the rate of interest offered on this scheme comparatively higher than that of the regular savings and fixed deposit bank accounts, but you also get tax benefits up to Rs 1.5 lakh per year under Section 80C of the IT Act, 1961.

SCSS has a maturity period of five years with an extension of three years. It offers an interest rate of 7.4% for Q1 FY 2021-22. You have SCSS offering one of the highest interest rates among fixed-income investments. Moreover, you can invest a maximum amount of Rs 15 lakhs. You must provide your nominee when opening the SCSS account.

Investment Options for Growth

There are various types of investments through which senior citizens can orient their portfolios towards growth and wealth accumulation. Here are some of the best investments through which retirees and pensioners can enjoy inflation-beating returns: 

Mutual Funds

Investing in mutual funds is by far the best decision you can make to build wealth over some time. Start investing in mutual funds and enjoy the twin benefits of – Inflation-beating returns and tax savings.

You can invest in ELSS, a tax-saving mutual fund that qualifies for Section 80C tax deduction, up to Rs 1.5 lakh per year. ClearTax offers a wide array of mutual fund plans catering to different needs. Invest in top-performing mutual funds handpicked by our experts and enjoy inflation-beating returns from the comfort of home.

National Pension System (NPS)

The National Pension Scheme can be availed by individuals between the ages of 18 and 65 years. Senior citizens can extend the tenure up to 70 years of age as well. Under Section 80C, taxpayers are eligible for deductions up to Rs 1.50 lakh per year on the investment made towards NPS.

Similarly, under Section 80CCD, individuals are also eligible for additional tax benefits up to Rs 50,000 a year. The investment made towards the NPS can be directed towards equity, corporate and government securities, depending on the individuals choice under the active option. However, you can opt for the auto choice where asset allocation happens depending on your age.

Though NPS does not offer a steady interest income, the scheme generates excellent returns and your investment can grow at a faster rate by orienting your NPS towards equity funds. However, the maximum NPS investment in equity is capped at 75%.

Investment Amount & Returns

The various investment avenues and their returns are summarized as follows, along with the minimum investment required:

Investment AvenueReturnsMinimum Investment Amount
FDs & RDs3-7%Depends on banks & investors
PMVVY8% approx.INR 1,50,000
SCSS7.6%INR 1,000
Mutual Funds10-15% approx.INR 100 onwards
NPS8-10%INR 500 p.m. or INR 1,000 p.a.


Related Articles

Pradhan Mantri Vaya Vandana Yojana

What is NPS?

Senior Citizen Savings Scheme

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