Bank FD vs POMIS vs SCSS vs PMVVY: Where to invest for maximum interest rate, regular income?

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Updated: January 20, 2020 2:18:55 PM

Pradhan Mantri Vaya Vandana Yojana, Senior Citizens Savings Scheme, bank fixed deposits, and post office monthly income scheme provide safety and a regular income to investors.

Bank FD, POMIS, SCSS, PMVVY, maximum interest rate, fixed returns, Life Insurance Corporation, LIC,Among the four investments, the Senior Citizens Savings Scheme (SCSS) offers the maximum interest rate of 8.6 per cent per annum.

Those investors who need a regular income on their investments have several investment products to choose from. However, such investors, who are mostly senior citizens, need safety, liquidity, fixed and a high-interest rate on their investments. The four investments that they can consider are Pradhan Mantri Vaya Vandana Yojana (PMVVY), Senior Citizens Savings Scheme (SCSS), bank fixed deposits, and post office monthly income scheme (POMIS). All of these come with either monthly or quarterly interest rate and carry fixed returns. SCSS offers the maximum interest rate of 8.6 per cent per annum.

Post office monthly income scheme (POMIS)

Post office monthly income scheme is for a duration of 5 years. Currently, the interest rate on the Post office monthly income scheme is 7.6 per cent per annum payable monthly. The maximum investment in Post office monthly income scheme in single name is Rs 4.5 lakh while it is Rs 9 lakh on joint name. There is no tax benefit in Post office monthly income scheme.

Senior Citizen Savings Scheme (SCSS)

In SCSS, the guaranteed return is for 5 years. SCSS can, however, be extended after maturity for 3 years but the prevailing rate of interest will apply. Currently, the interest rate on SCSS is 8.6 per cent per annum and can be had on a quarterly basis. The investment comes with tax benefit under section 80C. Only those who are above age 60 can invest in SCSS and the maximum investment is capped at Rs 15 lakh.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

The investment in Pradhan Mantri Vaya Vandana Yojana (PMVVY) is for 10 years and return is around 8 per cent per annum. The interest rate can be had on a monthly, quarterly, half-yearly or annual basis. The investment in PMVVY can be made only by those who are senior citizens and the scheme is open till March 31, 2020. The investment which is capped at Rs 15 lakh can be made only through Life Insurance Corporation (LIC), either offline or online.

Bank Fixed Deposit ( FD)

Currently, most banks are offering a return of 6.5 per cent to 7 per cent across different duration. SBI is offering 6.15 per cent on its FDs across 1 to 10-year duration. One may invest in bank FD from as low as 7 days to a tenure of 10 years. The 5-year tax saving FD is also available in banks. For senior citizens, there is an additional rate of interest of 0.5 per cent per annum. Some Small Finance banks offer a slightly higher rate of return to investors. The interest rate can be had on a monthly, quarterly, half-yearly or annual basis in bank FDs.

Even though the implicit guarantee exists on bank FD, the explicit guarantee is only up to Rs 1 lakh under the Deposit Insurance and Credit Guarantee Corporation (DICGC) Act. The insurance cover is on the principal and interest earned and is available on deposits in each branch of a bank.

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