Rising market interest rates had made sure that good times for regular income seekers were already here, before the Budget speech was read out. But Budget 2023 has sweetened the deal a bit more for senior folk aged 60-plus and those who have taken VRS after 55.

Until now, though the government offered attractive rates on Senior Citizens Savings Scheme (SCSS), the scheme offered limited utility for seniors because of the ₹15-lakh cap on the total deposits one could make in it. But the Budget has now doubled the limit to ₹30 lakh per person.

With the annual interest raised to 8 per cent for January-March 2023, retirees can now set up an annual income of ₹2.4 lakh (or ₹20,000 monthly) from this scheme. In families where two individuals are seniors, aggregate deposits of up to ₹60 lakh can be made in individual names, with the monthly income potential at ₹40,000.

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SCSS is a five-year deposit scheme offered by India Post and leading banks. Though rates on the scheme are reset quarterly, depositors investing a specific quarter get to lock in for five years at the entry rate.

Retirees receiving their final payouts can benefit by maxing out deposits in this scheme before looking for other avenues. Apart from high rates, the other benefit of SCSS is that it allows premature withdrawal after one year with a penalty. Beyond SCSS, one can invest in government securities for tenors ranging from one to five years through the RBI Retail Direct platform. Today, one-year securities on this platform yield about 6.9 per cent, four to five-year securities 7.1 per cent and 10-year ones 7.3 per cent.

Then, there are GOI Floating Rate Savings Bonds which offer 7.35 per cent currently. These rates change every six months and are pegged to a 0.35 percentage point spread over NSC. But the seven-year lock-in on these bonds without any secondary market liquidity makes them less attractive than SCSS or g-secs. Though bank and NBFC FDs now offer rates of 7 to 7.5 per cent on one to three-year FDs, SCSS and g-secs are preferable as they are sovereign-backed.  

For regular income seekers who are not seniors, the Budget has sought to make the Post Office Monthly Income Account (POMIS) more attractive by lifting the individual deposit limit from ₹4.5 lakh to ₹9 lakh and joint deposit limit from ₹9 lakh to ₹15 lakh. But with the interest rate on POMIS at just 7.1 per cent for a five-year lock-in period, the scheme is unattractive compared to one to three-year g-secs which offer 6.9 to 7 per cent. It may be better to defer investments in POMIS until rates look up.

The Budget has also brought about parity between listed NCDs and FDs on TDS. As NCDs are usually issued by riskier entities, investors may want to rethink their choices here. After loophole-plugging by the Budget on guaranteed income insurance products and NCDs, Systematic Withdrawal Plans from debt mutual funds remain the only avenue where one can set up regular ‘income’ that is not taxed at one’s slab rates.

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