1. 5-yr+ post-tax returns from Senior Citizens Savings Scheme (SCSS) and a Liquid fund are not comparable for taking an investment decision as:-
a) SCSS qualifies for Sec 80C tax benefits, while a liquid fund doesn't,
b) SCSS is a govt.-backed scheme towards safety, while a liquid fund is a market-related debt instrument,
c) SCSS has an investment limit of 1.5 lakhs, while there is no investment limit for a liquid fund,
d) SCSS return rate is fixed quarterly by the government and remain unchanged for the tenure, while returns on a liquid fund are not guaranteed,
e) SCSS has a 5-yr+ duration, while a liquid fund's underlying assets mature within 60-91 days,
f) SCSS has no extra management charges, while a liquid fund charges a fee called an expense ratio, and
g) SCSS quarterly interest is fully taxable along with TDS, but qualifies for Sec 80TTB deduction upto Rs.50,000, while short-term capital gain (before 3 years) in a liquid fund is fully taxable at the slab rate and long-term capital gain (after 3 years) is taxed at 20% after indexation.
2. As a senior citizen, it is advisable to invest in:-
a) SCSS - for capital protection, assured returns on allowable investment limit and tax benefits under Sec 80C and Sec80TTB.
b) Liquid fund - for an emergency fund with high liquidity, as an alternative to savings bank account with better returns without any exit load albeit with some market risk, for giving inflation-efficient returns compared to FDs, for investing near-term working capital needs, and for organizing STPs to equity funds.
3. At the end of the day, the duration of your investments should be in line with your investment horizon needs and how much risk you are prepared to take for better returns.
a) SCSS qualifies for Sec 80C tax benefits, while a liquid fund doesn't,
b) SCSS is a govt.-backed scheme towards safety, while a liquid fund is a market-related debt instrument,
c) SCSS has an investment limit of 1.5 lakhs, while there is no investment limit for a liquid fund,
d) SCSS return rate is fixed quarterly by the government and remain unchanged for the tenure, while returns on a liquid fund are not guaranteed,
e) SCSS has a 5-yr+ duration, while a liquid fund's underlying assets mature within 60-91 days,
f) SCSS has no extra management charges, while a liquid fund charges a fee called an expense ratio, and
g) SCSS quarterly interest is fully taxable along with TDS, but qualifies for Sec 80TTB deduction upto Rs.50,000, while short-term capital gain (before 3 years) in a liquid fund is fully taxable at the slab rate and long-term capital gain (after 3 years) is taxed at 20% after indexation.
2. As a senior citizen, it is advisable to invest in:-
a) SCSS - for capital protection, assured returns on allowable investment limit and tax benefits under Sec 80C and Sec80TTB.
b) Liquid fund - for an emergency fund with high liquidity, as an alternative to savings bank account with better returns without any exit load albeit with some market risk, for giving inflation-efficient returns compared to FDs, for investing near-term working capital needs, and for organizing STPs to equity funds.
3. At the end of the day, the duration of your investments should be in line with your investment horizon needs and how much risk you are prepared to take for better returns.