New Delhi, July 14: The new savings scheme for senior citizens, which will offer a 9 per cent return for a five-year term period, will be introduced from August 1, the government said in a statement.

“The scheme would be made available through post offices initially to persons above 60 years of age and would have a maximum deposit ceiling of Rs 15 lakh,” a finance ministry statement said.

“The interest would be payable quarterly on a non-cumulative basis,” it said, adding that the interest income would be taxed according to the provisions of the Income Tax Act.

The savings scheme for senior citizens was announced by finance minister P. Chidambaram in this year’s budget. He also said the Varishtha Pension Bima Yojana will cease to exist as the new scheme adequately takes care of old people.

The new scheme will provide a major relief to senior citizens as interest earnings on debt instruments have halved ever since the RBI shifted to a soft-rate regime. The problem has been compounded by rising inflation, which is just over the 6 per cent-mark.

Interest rates are at three-decade lows with the bank rate at 6 per cent; the short-term repo rate is at 4.5 per cent. Earnings from investments in small savings schemes are lower by nearly 5 per cent at 8 per cent, down from 13 per cent in 2001-02.

Public provident fund and special deposit schemes also attract an 8 per cent interest rate.