Savings Schemes for Senior Citizens
Two major savings schemes cater specifically to senior citizens, those individuals who are aged 60 or above. These schemes – Senior Citizens Savings Scheme (SCSS) and Pradhan Mantri Vaya Vandana Yojana (PMVVY) offer higher rates of interest than prevailing FD rates. SCSS also offers a tax deduction for annual contributions up to Rs 1.5 lakh under Section 80 C.
The SCSS is open to individuals above the age of 60 and has an interest rate of8.7%. You can apply for an SCSS account at a bank or post office. The minimum investment is Rs 1,000 and maximum is Rs 15 lakh. The tenure of the SCSS is 5 years and can be extended for another 3 years. To extend the account, you have to give a request within 1 year of the original maturity of the account. The investment in the SCSS is tax deductible up to Rs 1.5 lakh per annum under Section 80 C but the interest on the SCSS is fully taxable. You can ask for premature closure after one year of opening the account. The premature closure penalty is 1.5% if closure is requested 1-2 years from account opening and 1% is closure is requested after 2 years.
This is essentially a 10 year fixed deposit withLIC (Life Insurance Corporation)although it is marketed as a pension. It is available to those who have crossed the age of 60 and has an interest rate of8%. The minimum investment limit is Rs 1.5 lakh and the maximum limit is Rs 15 lakh. A Rs 1.5 lakh deposit will get you a pension of Rs 1,000 per month, for a period of 10 years. A 15 lakh deposit will get you a monthly pension of Rs 10,000 for 10 years. At the end of the tenure, your investment amount is returned to you.
TheNational Pension System (NPS), earlier known as New Pension Scheme is a pension system open to all citizens of India. The NPS invests the contributions of its subscribers into equities and debt and the final pension amount depends on the performance of these investments. Any Indian citizen from the age of 18-65 can open an NPS account. The NPS matures at the age of 60, but can be extended till the age of 70. Partial withdrawals up to 25% of your contributions can be made from the NPS after three years of account opening for specific purposes like home buying, children’s education or serious illness. The minimum annual contribution for an NPS account is Rs 1,000. There is no maximum limit but the tax deduction under section 80C and 80 CCD (1B) is limited to Rs 2 lakh per annum.