retirement planning
Maintaining regular income after retirement is the biggest financial need of every senior citizen. In such a situation, government-backed small savings schemes provide the option of safe investment and fixed returns. Among these, Post Office Monthly Income Scheme (POMIS) and Senior Citizens Savings Scheme (SCSS) are among the most popular schemes. However, before investing, it is important to understand the returns, tax benefits and withdrawal rules of both the schemes.
How much can one invest in POMIS and SCSS?
An account can be opened in Post Office Monthly Income Scheme (POMIS) with a minimum of Rs 1,000. In this, maximum investment is allowed up to Rs 9 lakh in single account and Rs 15 lakh in joint account.
Whereas in Senior Citizens Savings Scheme (SCSS) also the minimum investment is Rs 1,000, but a person can invest up to Rs 30 lakh in total. This scheme is specially designed for people aged 60 years and above. Retired employees between 55 and 60 years of age can also invest in it with certain conditions.
Which scheme gives more interest?
At present, 7.4% annual interest is being given on POMIS, whereas 8.2% annual interest is being given on SCSS. The maturity period of both the schemes is 5 years, but the method of interest payment is different.
In POMIS, interest is deposited into the investor’s account every month. On the other hand, in SCSS, interest is paid every quarter. Due to higher interest rates SCSS is able to give better returns to investors.
If an investor deposits a maximum of Rs 15 lakh in a joint account of POMIS, he will get interest of around Rs 1.11 lakh annually i.e. approximately Rs 9,250 per month. Whereas on an investment of Rs 30 lakh in SCSS, an annual income of about Rs 2.46 lakh i.e. about Rs 20,500 per month can be earned.
Who is ahead on the tax front?
The interest received in POMIS is fully taxable and there is no tax exemption on investment. On the contrary, by investing in SCSS, tax exemption of up to Rs 1.5 lakh can be availed under the Income Tax Act. However, the interest received from this scheme is also taxable.
Premature Withdrawal Rules
Both the schemes have the facility of premature withdrawal of money, but some penalty has to be paid for this. In POMIS the account cannot be closed before one year, whereas in SCSS the benefit of interest is not available if the account is closed within one year.
What is the better option?
According to experts, SCSS can prove to be a better option for retired people due to higher interest rate, larger investment limit and tax benefits. Whereas POMIS is useful for those investors who want to get fixed income every month. Both the schemes can be used in a balanced manner as per the financial needs.
