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Five low-risk saving options for seniors

As a senior citizen, financial independence is a matter of utmost importance. So while you may have stopped working, the same need not apply for your money.

Here are some options for you to consider for saving and growing your money without too much risk.

1. Senior Citizens Savings Scheme (SCSS): A government-backed savings scheme, which is more secure than bank FDs and offers an interest rate of 7.4% (as of April 2020). Investments in SCSS are tax deductible up to Rs 1.5 lakh per annum but the interest on the same is taxable.

2. Post Office Monthly Income Scheme: The Post Office Monthly Income Scheme (POMIS) is one of the best Government-backed small savings schemes for senior citizens that helps them save a specific amount each month.

A maximum of Rs 4.5 lakh for individuals and Rs 9 lakh through a joint account is permissible. The POMIS offers an interest rate of 6.6% (as of April 2020) and has a lock-in of 5 years


3. Senior Citizen Fixed Deposit:
Banks offer a higher interest rate to senior citizens which could be 0.25% to 0.75% higher than those offered to other individuals. Loans are available against senior citizen FDs. The tenure ranges from 1 to 10 years. Senior citizens can choose to receive regular interest payouts to meet expenses and avail of tax benefits under Section 80C up to Rs 1.5 lakh a year

4. Tax-free bonds:
Tax-free bonds are issued by government-backed institutions like PFC, NHAI, REC, IRFC, HUDCO, NTPC which carry the highest safety ratings. The most attractive feature is tax-free interest. These are an excellent investment option for senior citizens to earn a fixed annual income. However, one must invest in tax-free bonds, only if they are willing to stay invested for at least 10 years.

5. National Pension System
NPS has an age eligibility from 18 to 65 which means that senior citizens can also invest in it. Once an NPS account is opened, it can be extended all the way to the age of 70.

Investment in NPS is eligible for tax deduction up to Rs 1.5 lakh under Section 80C and up to an additional Rs 50,000 under Section 80CCD(1B). NPS money is invested in equity and debt funds as per the investor’s choice and generate returns. There is thus, no fixed interest rate on NPS but the money in it can grow much faster through equity investment.

On maturity, 60% of the NPS corpus is tax free. The balance 40% of the NPS corpus must be used to buy an annuity (monthly pension).