Best Investment Options For Senior Citizens In India (2024)

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The Senior Citizen Saving Scheme (SCSS) is backed by the central government of India. It is a full debt instrument with no risks, valid for those above 60 years of age. It gives the security of stable income for the entire tenure of investment.

Eligibility: SCSS is available only for citizens above 60 years of age and applicable for Hindu Undivided Family (HUFs) or Non-Resident Indians (NRIs). The exception for this scheme in age criteria is Indian citizens who opt for Superannuation or the Voluntary Retirement Scheme (VRS) while they are 55-60 years of age or between 50 and 60 years of age retired defense personnel.

Tenure: The maximum tenure of the SCSS is five years. After this, one can extend it for three more years. It is a one-time offer and you must note that upon extension, the rate of interest applicable at that very quarter would apply.

Withdrawal: The SCSS account can be at any given point of time prematurely closed – but one year after the account is opened. It is not a short-term deposit. If you close your account before two years, 1.5% of the amount deposited will be deducted as a penalty. After two years’ closure, 1% of the deposited amount will be deducted. After the five-year maturity, for the three-year extended accounts you can shut your account after the first year with no penalty applied. Also, your account is transferable anywhere in the country.

Tax: While considering the benefits in terms of tenure and returns, you should also understand tax implications ahead of investment. SCSS comes under the Exempt-Taxed-Taxed (ETT) category, this implies that as an investor in this scheme, you are exempt from taxation on the amount invested. The interest income is taxed according to your income-tax slab and maturity amount under section 80C. Tax Deducted at Source (TDS) is applied when the interest income you receive exceeds INR 50,000 in a financial year.

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Pradhan Mantri Vaya Vandana Yojana (PMVVY) was introduced for senior citizens in the year 2017, as it is a retirement scheme. It is operated and managed by Life Insurance Corporation (LIC). It is an instant plan that provides you a fixed amount regularly as an investor, once you invest a round sum of money in this scheme.

Eligibility: PMVVY is available only for citizens above 60 years of age and above. This scheme has no maximum age limit. Only available for Indian citizens and NRIs cannot enjoy this scheme.

Tenure: PMVVY policy term is ten years. You will receive the purchase price and final pension only after the ten-year period ends. It offers investors pension payout options yearly, half-yearly, quarterly and monthly. You can choose any option as per your retirement financial plan.

Withdrawal: You can prematurely close your PMVVY account in case of family emergence, sickness or death of your spouse. The surrender value you’ll receive is 98% of the initial invested amount.

Tax: PMVVY also falls under the ETT category. This implies that investors are exempt from being taxed on the invested amount. The exception is interest income is taxed according to your income-tax slab and the maturity amount is taxable too. TDS is not deducted and no tax deduction benefit under section 80C. Also, you do not have to pay Goods and Services Tax (GST) on your purchase.

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The National Pension System (NPS) can be availed by any Indian citizen between the age group of 18 and 65 years. Senior citizens can extend their tenure up to 70 years of age.

Eligibility: Any Indian citizen both resident and non resident in the age group of 18 and 70 years can take advantage of this investment option. However, the NRIs should be legally competent to execute a contract according to the Indian Contract Act. Persons of Hindi Undivided Families and Indian Origin are not eligible to subscribe to NPS.

Tenure: The maximum tenure of NPS is 60 years. As an investor, you must contribute to your account till you attain 60 years of age.

Withdrawal: Yes, you can withdraw partially from NPS for specific reasons like illness, marriage, education or disability, but only 25% of your contribution after completing three years. Also, premature withdrawal is possible after five years with a maximum of 20% of the corpus as a lump sum and an 80% minimum of the corpus has to be used for purchasing an annuity plan for getting the pension. If the total sum is less than INR 2.5 lakh, the entire corpus is paid as a lump sum to the investor.

Tax: Amount invested in the purchase of Annuity is fully entirely exempt from tax. However, annuity income in the subsequent years that you receive will be subject to income tax. Up to 60% of the sum corpus withdrawn in a lump sum is exempt from tax.

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Equity Linked Savings Scheme (ELSS) is one of the few tax-saving investment schemes that give investors the benefit of enabling the potential to earn higher returns as compared to provident funds, FDs and other tax-saving options. It is the only kind of mutual fund eligible for tax deduction under section 80C.

Eligibility: There is no age limit to start investing in ELSS. Choose a fund you want to invest in and complete the KYC procedure. You can invest in the form of a lump sum amount or in the form of SIP (Systematic Investment Plan).

Tenure: There is no maximum tenure in ELSS. However, you need to lock in your funds for three years from the time of investment.

Withdrawal: ELSS comes with a mandatory lock-in period of three years. Investors cannot withdraw their investment within a period of three years.

Tax: ELSS mutual funds provide investors with tax deductions of up to INR 1,50,000 annually under the provisions of section 80C. This helps you save up to INR 46,800 annually in taxes. However, your investments are locked in for at least three years from the date of investment.

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The Covid-19 pandemic created financial instability among the general population of investors more so among the senior citizens. The latest investment option for senior citizens was introduced in the year 2020 – Senior Citizen Fixed Deposits. It sought to provide regular stable income to investors 60 years of age and above during the difficult time of the pandemic.

Eligibility: Senior Citizen Fixed Deposit is flexible as it is available for all Indian senior citizens aged 60 years and above. NRI senior citizens can also avail of these FDs through a Non-Resident External Account (NRE) or Non-Resident Ordinary Account (NRO). Some banks even allow citizens over 55 years old to take advantage of this FD or people who take early retirement. This rule varies from bank to bank with terms and conditions applicable.

Tenure: The tenure of Senior Citizen Fixed Deposits ranges from short-term deposits i.e. 180 days to long-term i.e. one, three and five years.

Withdrawal: As an investor, you are permitted to withdraw early withdrawal. As a senior citizen, there is no penalty for early withdrawal of FD.

Tax: This investment option can also fall under the ETT category. The interest amounting up to INR 50,000 annually is tax-free in senior citizens’ cases. So, investment in this scheme should be done after you consider all other bank fixed deposits that are currently active under your name. If you invest in the maximum tenure of five years lock-in tax saving FD, you can easily avail tax deduction of up to INR 1.5 lakh under section 80C.