Lock into the Post-Office Senior Citizens Savings Scheme

For senior citizens looking for the safest fixed income option with a regular pay out, the Post-Office Senior Citizens Saving Scheme (SCSS) is a good bet at 7.4 per cent. The scheme comes with a lock-in period of five years and allows seniors above 60 to deposit up to ₹15 lakh. Leading banks such as SBI and HDFC Bank — considered safe — are offering seniors interest of 5.8-6.2 per cent per annum on deposits of similar tenure.

Though the current interest rate offered on the PM Vaya Vandhana Yojana is the same 7.4 per cent as that of SCSS, the policy term of ten years for PMVVY is a drawback. Today, we may be closer to the bottom in the rate cycle. But don’t lose sleep over whether locking into the investment for longer tenure could result in opportunity loss if the rates start moving up. The current premium for SCSS returns over leading banks is at least 120 basis points. So it may take quite sometime for FDs to catch up. Besides, SCSS allows pre-mature withdrawal with a penalty of 1 per cent after two years, in case you want to move out.

Investment and interest from SCSS is eligible for tax benefits under sec 80C and 80 TTB (up to ₹ 50,000 interest per annum) respectively, which sweeten the deal.