Where can senior citizens invest when deposit rates are falling

Where can senior citizens invest when deposit rates are falling

FPJ BureauUpdated: Friday, October 18, 2019, 02:21 PM IST
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The Reserve Bank of India (RBI) has cut the repo rate five times in 2019. Banks are following suit have cut interest rates on loans as well as on an investment avenue favoured by many senior citizens fixed deposits. Yes, the flipside to the lower interest rate regime is the fall in returns of fixed income products like the Fixed Deposit, which is a product that many senior citizens depend on for regular income as they do not wish to invest in risky instruments.

But, there is some good news for senior citizens, they can invest in Senior Citizens Savings Scheme (SCSS) that offers the highest rate of interest at 8.6% per annum for July to September 2019 quarter. The Finance Ministry reviews the interest rate every quarter. Interests under SCSS are paid on a quarterly basis, the first working day of April, July, October and January. Among all the various small savings scheme, SCSS offers the highest rate of interest.

Senior Citizens can available this FD facility through several public and private sector banks and India Post offices. This scheme was launched in 2004 for the benefit of senior citizens. To avail this benefit the individual should be aged 60 or above the age of 60. Individuals who have attained the age of 55 years or more but have not turned 60, too can open their accounts under this scheme if they have opted for voluntary retirement scheme (VRS). Defence personnel who are aged above 50 too can avail this benefit.

Under SCSS the individual can can open an account with a minimum deposit of Rs. 1,000, while the upper limit is Rs. 15 lakh. The deposit in the account should be in the multiples of Rs. 1,000. Under SCSS banks provide the option of opening accounts either individual or jointly with the spouse.

Accounts opened under SCSS has a tenure of five years, which can be extended by another three years after it matures. In can any individual wishes to close the account after a year or before the completion of two years, then 1.5% of the deposit shall be deducted as penalty. And if the account is closed after two years then 1% shall be deducted as penalty.

Senior citizens can also avail of tax deduction under section 80C of the Income Tax Act on investments up to Rs 1.5 lakh. However, the interest earned under this scheme is fully taxable. If an individual earns more than Rs 40,000 interest in a financial year, tax deducted at source (TDS) is applicable to the interest earned.

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