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Budget 2021 update :It has been proposed to exempt the senior citizens from filing income tax returns if pension income and interest income are their only annual income source. Section 194P has been newly inserted to enforce the banks to deduct tax on senior citizens more than 75 years of age who have a pension and interest income from the bank.
When a working professional decides to retire or has attained the age of retirement, then their income would stop. This means they will no longer have a regular inflow of funds. Thus, it makes it necessary for them to watch out on their expenses and at the same time, look for safer investment options. We have covered the following in this article:
The Senior Citizens’ Savings Scheme (SCSS) is government-backed offered to senior citizens. You can open an SCSS account at post office branches or banks. If you have retired before the age of 60 years, then you can avail the benefits of this scheme within one month of receiving your first pension. The SCSS accounts come with a tenure of five years. On maturity, you can extend it for a further three years. You are allowed to operate more than one SCSS accounts, and the investments in these accounts are eligible for tax benefits under Section 80C of the Income Tax Act, 1961.
Bank deposits are considered as one of the safest investment options. Traditionally, Indians prefer parking their surplus funds or savings in bank deposits. If you have a lump sum in your hands, then you can invest it in fixed deposits (FDs). The rate of returns offered by FDs is much higher than a regular savings bank account. Furthermore, senior citizens are given 0.5% higher rate of interest. Thus, FDs are a very attractive investment option for senior citizens. If you have a regular inflow of funds and you wish to invest small amounts regularly, then you can invest in recurring deposits (RDs). You can invest a fixed amount on a monthly basis. Like FDs, RDs too offer 0.5% higher interest for senior citizens.
If you are willing to take some risk, then you can invest in debt mutual funds. This is a great option to earn much higher returns than bank deposits. What’s more? You can invest small amounts periodically through systematic investment plans (SIPs). Debt mutual funds invest in money market instruments such as treasury bills, certificate of deposit, and other similar options that are capable of generating assured income.
Post office monthly income scheme (POMIS) is another government-backed scheme which offers assured returns that are much higher than a regular savings bank account. The government reviews the rate of interest on a quarterly basis. The interest is paid out every month. You can invest a maximum of Rs 4.5 lakh in these accounts. POMIS accounts come with a tenure of five years.
Senior citizens may also consider investing in immediate annuities of life insurance companies. As per the provisions of annuity plans, the life insurer will payout a fixed amount on a regular basis over the subscriber’s lifetime. Annuity plans can be purchased with a one-time lump sum or periodically, as per your comfort.
Planning your retirement is key. This will alleviate the need to depend on others for your living expenses. Investing should not end with your retirement; it should carry on. Remember, there is always life after retirement as well, and you need to plan for that.