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Options for senior citizens to earn regular income with low risk

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NEW DELHI: Many senior citizens require regular income. There are options available which can help a senior citizen to have a simple income portfolio which is safe, liquid, tax efficient, and easy to manage.

Following are some of the options.

1) Senior citizens savings scheme (SCSS): You can invest 15 lakhs in SCSS which is a five-year product extendable by another three years. Interest rates are currently 7.40% per annum. One can opt for quarterly payouts. It can be bought through most public sector banks or Indian Post Offices.

2) Pradhan Mantri Vaya Vandana Yojana (PMVVY): Thus is a 10-year product. One can invest up to 15 in this scheme. Interest rates are currently 7.40% p.a. Opt for the monthly payouts. One can buy this in most branches of Life Insurance Corp or online.

3) RBI Floating Rate Bonds: Invest 15 lakhs or more in RBI floating rate bonds. It has a lock-in of six years for citizens above 60 years (above 70 years – 5 years and above 80 years- 4 years). Interest rates are currently 7.15% p.a. and only paid half yearly.

4) Around 10-25% of total savings can be parked in bank accounts for liquidity related needs, said Naveen Rego, a Sebi-registered investor advisor.

5) About 1.50 lakh can be invested annually in tax saving fixed deposits or postal National Savings Scheme to reduce taxable income under Section 80C.

“The above portfolio is suitable for senior citizens whose financial portfolio is below 75 lakhs to 1crore and one has no other income from pensions and rents. As most of these instruments are giving a return of 7% per annum and above as per a rough estimate, 1 crore invested in the above strategy would yield roughly 55,000 income per month and that too without any taxes and tensions,” said Rego.

“Senior citizens get 50,000 deduction under Section 80TTB and 1.50 lakhs under Sec 80C. This would help in tax efficiency. My firm view is one need not have any complications of market linked products in such portfolios no matter whatever the returns one gets from competing products. Let the need (and not greed) be the prime driving force in building this portfolio,” he added.

Other points to note:

“Senior citizens having larger financial portfolios, more than Rs75 lakh-1 crore) and/or having large other income (like rentals/pensions) should look at portfolios of stocks, mutual funds and REITs in addition to the above for the best benefits. Here too with proper planning one can balance safety, liquidity, regular income and tax efficiency,” said Rego.

One can avoid the annuity plans from insurance companies as yields are quite low.

Avoid investments in real estate as these are illiquid and earn low rental income.

Avoid unregulated and get rich quick schemes. There is nothing like high returns and low risk.

Submit Form 15G to the relevant institutions if one is not having taxable income. This will reduce the impact of tax deductions at source (TDS).

No need to have any life insurance plans. Health insurance plans are mandatory but be wary of the exclusions. Keep liquid money aside for emergencies.

Have valid nominations and a proper will.

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