Senior Citizens – Investments, Benefits and Loans

WHO IS CONSIDERED A SENIOR CITIZEN IN INDIA?

It was easy to identify a senior citizen in India, a couple of years back, at least for those who were in employment.

Anybody who had retired was a senior citizen, since retirement age was 60 in most places.

However, there were, and there are companies where retirement age is 58. Many people below 60 have chosen to quit, or are circumstantially forced to quit, much before the retirement age. Improved levels of fitness and skin care also make it difficult to guess age from appearance.

However, not all senior citizens stay at home or depend on a passive income. They are engaged in business, freelancing, consulting, social initiatives and lead busy lives.

BUT… the one thing that does not change is availing benefits of senior citizen schemes wherever available. Just about everybody wants to get those.

One can get a senior citizen card, or use proof of date of birth, along with other KYC documents to avail of these benefits. Take care of compliance, such as Aadhar-PAN linking and others to facilitate tasks.

Retired defence officers are eligible for many of these benefits before the age of 60, and just with the help of their defence identity card.

WHAT ARE SPECIAL BENEFITS AVAILABLE TO SENIOR CITIZENS?

SENIOR CITIZEN DEPOSIT SCHEMES

1. PRADHAN MANTRI VAYA VANDANA YOJANA

It is a government-subsidised scheme which currently offers monthly income at the rate of 7.4% for monthly payment of interest, and 7.66% for annual payment of interest. One can choose between monthly, quarterly, half-yearly or annual payments.

The minimum purchase price is Rs.1,50,000/- and maximum Rs. 15,00,000/-.

One can buy it from a LIC office or the LIC website.

The sum assured is Rs.1,56,000/- if the monthly pension is Rs. 1000/-, and it goes up to Rs. 15 lakhs for a monthly interest payment of Rs. 9250/-.

Payment is single premium for a period of 10 years.

Pension is subject to taxes as per slab applicable to the pensioner.

2. SENIOR CITIZEN SAVINGS SCHEME

The scheme is open to citizens above 60 years of age, or retirees between the age of 55-60 years, provided the account is opened within a month of retirement.

Account can be opened singly or jointly, and has a nomination facility.

Period of deposit is 5 years, extendable by 3 years.

Monthly interest is payable.

This scheme offers 7.4% p.a. rate of interest (presently), with a maximum limit of Rs. 15 lakhs or the amount received on retirement, whichever is less.

Accounts can be opened in Post Office or Authorised Banks.

Interest is fully taxable.

3. POST OFFICE MONTHLY INTEREST SCHEME (POMIS)

The current rate of interest is 6.6% p.a, for a period of 5 years. The maximum amount is Rs. 4.5 lakhs for a single person, and Rs. 9 lakhs jointly.

4. PUBLIC PROVIDENT FUND

One can invest to build a corpus for the long term, since the facility of monthly payment is not available.

The prevailing rate of interest is 7.1%. It carries a risk since rates of interest can be revised at the end of every quarter.

The maximum amount allowed is Rs. 1.5 lakhs in a year.

This is a EEE scheme, where the principal, interest or maturity proceeds do not attract interest.

5. SENIOR CITIZEN BANK DEPOSITS

Banks offer a higher interest rate to senior citizens. It is the applicable card rate for a particular amount and tenor plus 0.5%. 

State Bank of India presently pays 0.8% above the regular rates, in a Special Fixed Deposit scheme for senior citizens. The scheme has been extended till 30th June, 2021.

The higher rate benefit is not available for high-value deposits, where deposit rates are negotiated with the bank.

Interest is taxable, if it is more than Rs. 50,000/- in a year.

If you are not a taxpayer, remember to submit Form 15H to the bank, to prevent debit of TDS (Tax Deduction at Source) by the bank for interest payable on deposits.

Get an overview of financial instruments here

1. Rail travel

Concession of 50% is available for men above the age of 60 years, and women above 58 years.

2. Air Travel

Air India is currently offering a 50% discount to senior travellers, above the age of 60 years.

Certain airlines offer the discount beyond the age of 63 or 65, so one needs to check.

SENIOR CITIZEN LOANS

Are you opting for a loan?

Some financial institutions do provide loans for senior citizens up to the age of 70 years. However, some schemes insist on completion of the loan period by the age of 70 years.

1. PERSONAL LOAN FOR PENSIONERS

Loans are made available to senior citizens, upto the age of 70 years, if they have a pension income. The amount of loan usually is 12-18 times that of the monthly pension.

2. LOAN AGAINST PROPERTY

You can avail of LAP, as it is popularly known, or Loan against property if you are a senior citizen with a regular source of income, subject to terms and conditions of the bank.

3. LOAN AGAINST COLLATERALS (Fixed Deposits of the same bank/ National Savings Certificates/LIC Policies/ Kisan Vikas Patra)

Banks finance up to 75% of the present value of the financial instrument held by you is available on pledging the documents to the bank.

4. REVERSE MORTGAGE FOR SENIOR CITIZENS

This is a product where no EMI is to be paid. You mortgage self-occupied residential property to the bank, and the bank pays you a monthly pension, for maximum 15 years. After 15 years, the monthly payments stop, but the property remains mortgaged to the bank. The bank takes possession of the property after demise or moving out of the last surviving borrower.

The maximum amount of loan is Rs. 100,00,000/-.

A legal heir has the option of settling the loan, and taking back the property from the bank.

There is a lot of fine print, so read the terms and conditions carefully.

This is a product where a senior citizen can leverage on investment made in real estate. Somehow, reverse mortgage is not very popular in India, due to a strong culture of leaving a legacy for the children. The terms and conditions do not appear very attractive, if one takes appreciation of property prices in consideration.

Banks too, are weary of taking long-term risk on real estate value.

Read sample terms and conditions here

5. HOME LOANS FOR SENIOR CITIZENS

The lure of real estate increases, as it as a source of rental income in golden years. Some people choose to settle down in a different place from where they have lived or worked so far, and need a house. The requirements may have changed. You may like to have more open spaces around, or healthcare facilities within easy access. Security, availability of elevators, proximity to near and dear ones can be other reasons. Space requirements also change depending on your lifestyle. The seniors who visit their children abroad for a couple of months in a year, choose to have smaller, low-maintenance homes. But those who wish to have live-in domestic help may need accommodation suited to their needs, with an adequate degree of privacy, protection and convenience.

Home loans are given to senior citizens up to 65 years of age, with a shorter tenor of the loan, and subject to fulfilment of other requirements.

GENERAL GUIDELINES FOR A HOME LOAN

The process of getting a loan sanctioned is more or less the same. It helps if you

  • have a good credit score
  • are debt-free other than the loan you are applying for
  • have a younger co-applicant or co-borrower to get a longer repayment term
  • choose a ready-for-possession property, rather than one under construction

SENIOR CITIZEN TAX BENEFITS

There are two categories here

  1. Senior citizens           between the age of 60 to 80 years
  2. Very Senior Citizens  above the age of 80 years

1. Tax Exemption limit

The tax exemption limit is Rs. 3,00,000/-  for senior citizens. It is Rs. 50,000/- higher than the 2.5 lakhs available to others.

Very senior citizens or Super Senior Citizens, as they are known enjoy an exemption limit of Rs. 5 lakhs.

2. Tax deduction at source for bank deposits

You enjoy tax-free interest on bank fixed deposits upto Rs. 50,000/- in a year. To know your advantage in comparison to others, non-seniors enjoy a limit of Rs. 40K in a year.

3. Senior Citizen Health Insurance and Expenditure

Under Section 80D, exemption on medical insurance premium paid is upto Rs. 50,000/-. The limit is Rs. 25000/- for others. A further deduction is allowed for medical expenditure incurred, on self or dependents, for certain specified diseases.

4. Exemption from Advance Tax

Senior citizens who do not have a business or pension income, are not liable to pay advance tax under Section 207.

5. Paper filing of returns

Income tax returns can be filed on paper using Forms 1-4 , or by e-filing.

Those above 80 years of age, with no pension or interest income are exempted from filing income tax returns.

You can check your financial quotient here to see how well placed you are, in terms of personal financial risk management.

TERM PLANS FOR INSURANCE

An insurance policy is intended to be income replacement of the bread-earner. In case you do not have an income from pension or business, it is not necessary to have life insurance.

Check if you are unnecessarily paying more for an insurance cover in Unit-Linked Insurance Plans. Consult a financial advisor for investing in the right plans.

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