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The Government has increased interest rates for 12 small savings schemes for the period of April-June 2023 and also changed the features of a few products. The rates of these small savings schemes are subject to quarterly review by the government. Here, we explore three safe options for senior citizens.
SCSS
Senior Citizen Savings Scheme (SCSS) offered by the government provides regular income to seniors. The rate offered has been hiked to 8.2 per cent for the period of April-June 2023, from 8 per cent in the previous quarter. The tenure of the scheme is 5 years and the interest rate during the deposit date will be fixed for the whole tenure and not change with rate revision in later quarters. The minimum investment amount is ₹1,000 and the maximum is ₹30 lakh, — which was ₹15 lakh till March 31, 2023. The interest payout under this scheme is quarterly and paid on the first day of April, July, October, and January.
Let’s say, an investor, Shyam deposits ₹20 lakh in SCSS scheme on April 6, 2023, at 8.2 per cent per annum. The quarterly payout for Shyam will be ₹41,000.
The applicant has an option to increase the tenure for another 3 years. The interest rate for the extended period will be the rate prevalent during that time and the extension is allowed only once. Those wishing to subscribe to this scheme can visit the nearest bank or Post office, fill Form A, produce age proof, and submit the required documents.
Post Office monthly income scheme (MIS)
The interest rate on Post office MIS has been hiked to 7.4 per cent for April-June 2023 quarter, from 7.1 per cent in previous quarter. MIS account can be opened by a single adult or as a joint account. The investment limit in MIS has been raised to ₹9 lakh for single account holder and ₹15 lakh in joint account — from ₹4.5 lakh and ₹9 lakh respectively. So, if Shyam invests ₹15 lakh in Post office MIS scheme at the current rate of 7.4 per cent he would get a monthly payout of ₹9,250 per month.
The amount deposited in MIS cannot be withdrawn before five years. Premature withdrawal attracts penalty i.e., if the amount is withdrawn before one year, then no benefits will be paid out. In case the withdrawal is being made within 1 to 3 years the amount is refunded after deducting 2 per cent penalty and in case of withdrawal during 4th to 5th year, the penalty will be 1 per cent only.
The interest from MIS account will be payable at the completion of each month. The process of opening an MIS is simple enough, investors can visit their nearest post office, fill the required form, and submit ID and address proof along with passport size photographs.
Bank FDs
In the last year, FD rates have seen a consistent rise. Bank FDs can be a good option for senior citizens who require steady and regular returns. Bank deposits have DICGC cover up to ₹5 lakh, which provides guarantee to up to ₹5 lakh. Banks generally provide additional 25 basis points to 50 basis points to senior citizens over the regular rates. Banks are quite flexible on the payout terms and offer monthly, quarterly, or cumulative option and the depositor may opt for the tenure as per the specific needs.
Currently, IDFC First Bank offers seniors 8.25 per cent per annum for a tenure of 1.5 years to 3 years. IndusInd Bank also provides 8.25 per cent per annum for a tenure of 1.5 years to 3 years to senior citizens. Small finance banks have been holding out better rates than the scheduled commercial banks for a while now, Equitas Small Finance Bank is offering 8.7 per annum to senior citizens for a tenure of 888 days. Another option to consider is Fincare SFB, which provides 8.7 per cent per annum to senior citizens for a tenure of 750 days.
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