Three Safe Investment Plans Available for Senior Citizens for Regular Income

Answer: There is currently no tax-exempt instrument available. However, you can buy tax-free bonds issued by various PSUs (Public Sector Undertakings) and Reserve Bank of India (RBI) in the past from the stock exchange. These tax free bonds are available at a premium to the issue price and are not tax efficient for those who are not in the higher tax slab, so I would recommend you to invest as follows:

From your retirement corpus, you can invest Rs. 15 million inches senior citizen Savings plan which offers you a better rate of 7.40% and which is fixed for a tenure of five years and is paid quarterly. You can invest additional Rs. 15 lakhs in Pradhan Mantri Vaya Vandana Yojana which sets you at 7.40% per annum for ten years.

The balance amount can be invested in RBI floating rate savings bonds. without any limits and which are equally safe as well as provide you better returns than other similar products available in the market. The interest on these bonds is reviewed half yearly. The tenure of these bonds is 7 years. Currently these bonds offer 7.15% annual interest. The interest on these bonds is payable half yearly and the rate is benchmarked against the interest payable on National Savings Certificate (NSC).

The rate of interest on NSC as applicable at the time of revision of interest rate will always be 0.35% higher than the rate of interest. In the present circumstances it is the best option considering the fact that you cannot risk your capital. Income from all the mentioned investment instruments is taxable and tax will also be deducted at source on the interest payable except Pradhan Mantri Vaya Vandana Yojana. You can submit the form no. 15G for payment of interest without deduction of tax if you fulfill the eligibility conditions.

Balwant Jain is a tax and investment expert and can be contacted on Twitter.com at jainbalwant@gmail and @jainbalwant.