Goal-Based Investing

Senior Citizen Savings Scheme Investment Option

Senior Citizen Savings Scheme Investment Option

Senior Citizen Savings Scheme The Indian government has taken several measures in various sectors for the benefits of the Senior Citizens. The Senior Citizens Savings Scheme is one such effort. Also read: A Look at Senior Citizen Savings Scheme from ICICI Bank The interest rate is decided by the government and will be set every quarter. The interest rates have now risen to 8.7 per cent, from nearly 8.4 per cent a few months ago.

The scheme can be opened in post office as well as banks such as ICICI, SBI etc. As suggested by the name, it is important to note that this investment is only meant for senior citizens in the country. This is overall a good scheme, but one would have expected that the returns would not be taxable, given the fact that these are meant for senior citizens. However, there are no tax benefits here. There is a TDS that would be applicable on these deposits. The one problem right now for the Senior Citizens Scheme is that the government will keep monitoring and changing the interest rates at regular intervals.

Sukanya Samriddhi Account

Sukanya Samriddhi Account is only for girl child to encourage education. This account can be opened at post offices and commercial banks. There are several advantages of placing money in the Sukanya Samriddhi Account. The first and the foremost is that you get tax benefits under Sec 80C of the Income Tax Act. The second is that you build a corpus for the girl child. If you are a long term investor, this is a great bet. The only worry is that the scheme has a very long term holding tenure, which is very high. The rate of interest on the scheme is currently 8.5 per cent per annum. Again, like most other post office schemes the interest rate on this scheme varies and is changed on a quarterly basis. Though the govt. at its discretion can keep rates unchanged as in Q1 of FY 2018-19.

Tax Saving Fixed deposits

Investing in tax saving fixed deposits will provide tax benefits under Section 80C of the Income Tax Act. You can deduct the invested amount from your taxable income, thus it will reduce your tax liability. However, TDS is applicable on the interest income if it exceeds Rs 10,000 in a financial year.  Make sure you update the PAN in your account or else 20 per cent TDS is applicable instead of 10 per cent. The interest rates vary from 6 to 7.5% per cent and recently banks like SBI are increasing the interest rates on the instrument. Currently SBI 5-year tax saving fixed deposit fetches 6.75%. DCB offers the highest interest rate of 7.2% on such deposits.

Select company deposits

The government of Kerala owned KTDFC, offers an interest rate of 8.50 per cent for three years. However, one will have to courier the form to one of the branches in Kerala. The deposits are guaranteed by the government of Kerala and offer one of the best interest rates in the country. These KTDFC deposits are one of the safest investment options for Indians currently. Company deposits are also safe, if you invest in the AAA rated deposits. For example, some deposits like Bajaj Finance and Mahindra Finance are AAA rated and offer good scope for earning higher interest rates than bank deposits. Most of these can offer you up to 1 per cent higher interest rate. However, we suggest that while these are good safe long term investments, there is an element of risk as well, as the nature of these deposits (unsecured) make them unsafe.

Schemes of debt mutual funds

One can also consider investment in select safe debt mutual fund schemes. These would offer you good investment opportunities for the more medium to long term perspective. Debt mutual fund park their money in safe government bonds, debentures, commercial paper etc., which naturally makes them very safe. However, there can always be an element of risk as well, which you should not ignore altogether.

In the past in one particular debt fund, there has been a default risk for a corporate instrument. So, it is not always that you get the best possible result from a debt mutual fund though they are considered as safe. Opt for the GILT Funds, which offer security and safety, as the money is invested in safe sovereign government owned securities. However, returns will largely be in line with other interest rates in the economy.

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