Financial Planning
Disclaimer
The financial planning and investment information provided on this webpage is for general informational purposes only and should not be considered professional financial advice. While we strive to offer accurate and up-to-date content, the information presented does not take into account your individual financial situation, goals, or risk tolerance.
We strongly recommend consulting a qualified financial advisor or professional before making any investment decisions or implementing financial plans. Reliance on the information provided on this webpage is at your own risk, and we are not liable for any losses, damages, or adverse outcomes resulting from actions taken based on this content. Tax laws, market conditions, and financial products are subject to change, and you should verify all information with appropriate authorities or advisors.
This webpage is not a substitute for personalized financial advice, and no content herein constitutes a recommendation, endorsement, or solicitation to buy or sell any securities or financial instruments. Always conduct thorough research and seek professional guidance tailored to your specific circumstances.
Need for Financial Planning
Naval veterans receive a regular pension (50% of last drawn emoluments for officers with 20+ years of service) under the One Rank One Pension (OROP) scheme. Family pensions (30-60% of emoluments) support dependents, in the event of the veteran’s passing. On retirement, veterans also receive a large lump sum corpus, which comprises retirement gratuity, commuted pension (up to 50% of pension, tax-exempt), leave encashment (up to 300 days), Naval Group Insurance Fund survival benefits (after deducting a one-time non-refundable premium to provide a term insurance cover under the PRDIES scheme), and the balance remaining in their Defence Services Officers’ Provident Fund account.
It is important for veterans to carry out proper financial planning and invest this large corpus to ensure that it grows even further, to provide financial stability and peace of mind during their post retirement years, and does not get frittered away. This would be required to manage their day to day as well as occasional higher expenses, maintain a comfortable lifestyle, provide for good healthcare especially in later years, and ensure a good future for their children.
Investment Options
Towards this end, there are a a number of investment options available to naval veterans, especially to those who have become senior citizens (after crossing 60 years of age). The main investment options are equity stocks, mutual funds (equity/debt/hybrid or balance), fixed deposits, real estate, as well as a host of government schemes. Each of these has a certain risk factor, give different levels of returns and have differing taxation policies. The main features of each is shown in the table below (click on the linked options for more details).
| Investment Option | Description | Risk | Returns (Approx.) | Liquidity | Best For |
|---|---|---|---|---|---|
| Equity Markets (Stocks) | Shares of companies listed on BSE/NSE. | High | 12-15% (long-term) | High | Long-term wealth creation, risk-tolerant |
| Equity Mutual Funds | Diversified funds investing in stocks for growth. | High | 10-15% (long-term) | High | Inflation-beating returns, risk-tolerant |
| Debt Mutual Funds/Bonds | Invest in government/corporate bonds for steady returns. | Low to Moderate | 7-9% | High | Income with flexibility |
| Fixed Deposits (FDs) | Bank/post office deposits with fixed interest. | Low | 6-7% | Moderate | Safety, short-term needs |
| Senior Citizen Savings Scheme (SCSS) | Govt-backed scheme for those 60+ (55+ for VRS). Quarterly interest. | Very Low | 8.2% | Low (5-yr lock-in) | Stable income, risk-averse |
| Post Office MIS (POMIS) | Monthly payouts, government-backed. | Very Low | 7.4% | Low (5-yr lock-in) | Regular income, risk-averse |
| Fixed Deposits (FDs) | Bank/post office deposits with fixed interest. | Low | 6-7% | Moderate | Safety, short-term needs |
| National Pension System (NPS) | Market-linked pension scheme with equity/debt options. Tax benefits. | Moderate | 8-12% | Low (until 60) | Retirement corpus, tax-saving |
| Sovereign Gold Bonds | Government bonds linked to gold prices, with 2.5% interest. | Moderate | 6-8% + 2.5% | Low (8-yr tenure) | Inflation hedge, diversification |
| Pradhan Mantri Vaya Vandana Yojana (PMVVY) | Pension scheme for seniors (60+), guaranteed returns. | Very Low | 7.4-7.7% | Low (10-yr lock-in) | Guaranteed income, seniors |
Investment Options Considered Safe for Senior Citizens
The investment options, which are considered ‘safer’ for senior citizens, though not giving as high returns as say equity, are tabulated below (click on the linked options for more details).:-
| Investment Option | Interest Rate (p.a.) | Tenure | Investment Limits | Payout Frequency | Taxation | Liquidity | Benefits |
|---|---|---|---|---|---|---|---|
| Senior Citizen Savings Scheme (SCSS) | 8.2% | 5 years (extendable 3 years) | Min ₹1,000, Max ₹30 lakh | Quarterly | Sec 80C deduction; interest taxable, TDS if >₹50,000/year | Premature withdrawal after 1 year with penalty | High safety, guaranteed returns, regular income |
| Pradhan Mantri Vaya Vandana Yojana (PMVVY) | ~7.4% | 10 years | Min ₹1.5 lakh, Max ₹15 lakh | Monthly/Quarterly/Half-yearly/Yearly | Interest taxable; no 80C benefits; GST-exempt | Premature withdrawal for critical illness with penalty | Guaranteed pension, flexible payouts |
| Post Office Monthly Income Scheme (POMIS) | 7.4% | 5 years | Min ₹1,000, Max ₹9 lakh (single)/₹15 lakh (joint) | Monthly | Interest taxable; no 80C benefits; no TDS | Premature withdrawal after 1 year with penalty; transferable | Fixed monthly income, capital protection |
| Senior Citizen Fixed Deposits (FDs) | 5.5%–8.55% | 7 days–10 years | Min ₹1,000, no upper limit (tax-saver: ₹1.5 lakh) | Monthly/Quarterly/At maturity | Sec 80C for tax-saver FDs; interest taxable; ₹50,000 exempt under 80TTB | Premature withdrawal with penalty | Safe, flexible, predictable returns Sr citizens FDs have greater ROI (0.5% more than regular FDs) |
| National Savings Certificate (NSC) | 7.7% | 5 years | Min ₹1,000, no upper limit | At maturity | Sec 80C deduction; interest taxable, reinvested interest qualifies for 80C | No premature withdrawal except specific cases | Assured returns, tax benefits |
| Public Provident Fund (PPF) | 7.1% | 15 years (extendable) | Min ₹500, Max ₹1.5 lakh/year | At maturity | Fully tax-free (EEE); Sec 80C deduction | Partial withdrawals from 6th year | Tax-free returns, long-term security |
| National Pension System (NPS) | 8%–12% (market-linked) | Till age 60/70 | Min ₹1,000/year, no upper limit | At maturity (annuity) | Sec 80C (₹1.5 lakh) + 80CCD(1B) (₹50,000); annuity taxable | Partial withdrawals after 3 years | Tax benefits, growth potential for risk-tolerant seniors |
| Tax-Free Bonds | 5.5%–6.5% | 10–20 years | No fixed limit | Annually | Interest tax-free; capital gains taxable | Sellable on stock exchanges (liquidity varies) | Tax-free income, capital protection |
| Mutual Funds (Hybrid/Debt) | 6%–8% (market-linked) | Open-ended | Min ₹100–₹1,000 (varies) | Flexible (dividends/redemption) | STCG as per slab; LTCG 20% with indexation | High; redeemable anytime (exit load may apply) | Better returns than FDs with moderate risk |
| Annuity Plans | 5%–7% (varies) | Lifetime/fixed period | Lump-sum, no upper limit | Monthly/Quarterly/Yearly | Pension taxable; no 80C benefits | Generally illiquid; no withdrawals | Lifelong income guarantee |
| RBI Floating Rate Savings Bonds | 8.05% (floating) | 7 years | Min ₹1,000, no upper limit | Semi-annually | Interest taxable | Premature encashment for seniors (age-based lock-in) | Safe, decent returns, medium-term investment |
Notes:
- Taxation: Seniors can submit Form 15H to avoid TDS if income is below the taxable limit. Section 80TTB allows ₹50,000 tax-free interest annually.
- Liquidity: Options like FDs and POMIS offer better liquidity, while NSC and annuities are less flexible.
- Risk: Government-backed schemes (SCSS, PMVVY, POMIS, NSC, PPF, RBI Bonds) are safest. NPS and mutual funds carry market risks.
Whatever the investment options selected by the veteran, there will still be a requirement to pay income tax if there are any capital gains / interest earned and also file the same in the Income Tax Return. For more details on these and other aspects of taxation, click here.
