For any retired individual, earning a steady
income from their investments is one of the top priorities. Those who continue
to work part-time or occasionally need some source of income to supplement
their regular salary. One of the financial instruments we have heard of are
fixed deposits. The other monthly income scheme options include post office
MIS, senior citizen savings scheme, and Pradhan Mantri Vaya Vandana Yojana. You
also have systematic withdrawal from mutual funds as an option.
Let us learn about these in-depth –
Fixed deposits: The many reasons why FDs are accessible is owing to the guaranteed
interest rates banks offer. Yes, you receive them monthly. Some even provide
deposits with maturity up to 10 years. In the future, banks are expected to
hike the interest rates on FDs. The interest income from bank deposits get
taxed based on your tax slab and added to your income. Banks deduct up to 10
per cent TDS on the interest earned only if the interest income exceeds INR
10,000.
Post office MIS: The post office monthly
income plan offers competitive interest rates every month. The interest
paid monthly begin from the date of deposit under post office. The maximum
limit of investment is INR 4.5 lakh if an individual account and INR 9 lakh if
a joint one. The maturity period is usually five years.
Pradhan Mantri Vaya Vandana Yojana: The Indian Government has launched several social security schemes
over the years. This scheme is ideal for senior citizens and provides
guaranteed interest rates monthly. The Life Insurance Corporation manages pension
scheme for senior citizens, which is termed as Pradhan Mantri Vaya Vandana
Yojana. The 2018 budget saw an increase in the investment limit to INR 15 lakh from
INR 7.5 lakh. The scheme will extend up to March 2020.
The scheme runs for 10 years, and the
pension is payable at the end of each period, according to the frequency chosen
by the pensioner at the time of application. The frequency could be monthly,
quarterly, half-yearly, or yearly.
Senior Citizen Savings Scheme: A deposit scheme for individuals who have entered their 60s is the
senior citizen savings scheme. It is also a scheme for people retiring on
superannuation or any other Voluntary Retirement Scheme (VRS) and have attained
55 years as well as retired personnel who is 50 years old, can open such a monthly
income scheme subject to some conditions. The maximum investment limit is
INR 15 lakh, and the rate of interest for the quarter is competitive. The deposits
under this scheme are exempted from taxes under section 80C of the Income Tax
Act, 1961. However, the interest earned is not subject to any deductions. The Tax
Deduction at Source applies to the scheme.
Mutual funds: Systematic withdrawal plans are a way for investors to earn monthly
income from mutual funds. Under this system, you need to specify a fixed amount
as income. Then on the due date, units amounting to the desired amount gets
redeemed. Some mutual funds also provide dividend option. Remember, dividends
do not offer any guarantee. They are determined based on fund performance and market
movements.
Choose a monthly income plan depending on
your risk appetite and financial profile.
