Senior Citizen Savings Scheme (SCSS), FD to GoI Bonds: Top investment options for senior citizens

Best investment options for senior citizens during Coronavirus pandemic: Check out investments that can be done online without having to go out.

Best investment options for senior citizens during Coronavirus pandemic: The financial lives of senior citizens have been affected by the coronavirus outbreak and subsequent lockdown as they generally deal with their investments through visits to banks or post offices. Here are some investment options a senior citizen may consider:

GoI Savings Bonds
Government of India Savings Bonds (GoI taxable bonds) are also referred to as RBI bonds. Sovereign guarantees back these bonds, and they come with 7.75% interest rate. The scheme has two options: non-cumulative option where interest is paid out bi-annually and cumulative option which pays interest on maturity.

There is no capping on the amount investible in these bonds but earnings are taxed as per income tax slab. The lock-in period for investors in the age bracket of 60-70 years is six years, while it is five years for those aged 70-80 years. The lock-in period for those aged above 80 years is only four years. Premature surrender of bonds is permitted only on August 1 and February 1 after the minimum lock-in period is completed. Penalty for premature surrender of bonds is 50% of interest due payable for the last six months of holding period.

Fixed deposits with banks
Bank fixed deposits (FDs) offer a fixed rate of interest over the investment tenure which varies across banks. Senior citizens are provided with 0.25% to 0.5% higher interest rate. Interest rate is revised periodically, but amidst the unprecedented developments, banks have been forced to lower interest rates on the bank deposits. This has affected senior citizens as they mostly rely on the interest income from their bank deposits.

Debt funds
Debt funds are a class of mutual funds that invest in high-quality fixed-income securities such as treasury bills, government and corporate bonds, and so on.Senior citizens may invest in liquid funds and overnight funds, as these offer high liquidity and safety. Returns from debt funds are taxed as per income slab.

Senior Citizen Savings Scheme (SCSS)
SCSS is a government savings scheme which provides a regular flow of income, and a means to save taxes under Section 80C. The minimum investment in an SCSS account is Rs 1,000 while the maximum is Rs 15,00,000, across all accounts put together. You are allowed to open a joint account with your spouse, who is also a senior citizen. SCSS accounts come with a lock-in period of five years and can be extended for three years on maturity. Premature withdrawals are allowed after completion of one year. However, if you happen to close the account after one year, but within two years, then preclosure charges are 1.5% of the amount deposited. If you withdraw after two years, then penalty is 1% of amount deposited.

Note: You cannot open an SCSS account online. You need to visit the nearest branch of the bank or post office for this.

Corporate deposits
Corporate deposits provide a higher interest rate than bank fixed deposits. Senior citizens are advised to invest in only those corporate deposits that are rated AAA and above.

The writer is founder and CEO, ClearTax