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How to choose right tax saving options for senior citizens
October, 29th 2021

The world of investments has lucrative schemes offering multiple investing options. The important factors to be kept in mind before investing are the objective of investing, age, time before you need money and the risk appetite. Senior Citizens require investment options that enable them to enjoy their retirement life. Their hard-earned money needs investments which can offer:

  • Capital security
  • Steady growth in wealth (low risk to medium risk inve ..

    With the start of every financial year, people start exploring all the available tax saving opportunities to avail deductions upto Rs 1,50,000 under Section 80C of the Income Tax Act.

    Investment Options for Senior Citizens

There are various types of investments through which Senior Citizens can manage their wealth. Some of the schemes offer regular monthly income, while other schemes offer wealth creation. The choice of investment depends on the objective of investment.

Senior Citizens Fixed Deposits
These are term deposits with special interest rates offered by banks to Senior Citizens. The rate of interest is generally 0.5% p.a. more than normal interest rates. The regular payout option can help senior citizens with a regular income stream. It ranks high in terms of liquidity. Senior Citizens can also avail tax benefit under Section 80C if it’s a 5 year fixed deposit. Under Section 80TTB of the IT act, interest income upto Rs. 50,000 for  ..

Senior Citizens Savings Scheme (SCSS)
SCSS is a government backed retirement savings programme. The scheme has a maximum limit of Rs 15 lakhs or the Retirement Corpus, whichever is less. The account can be opened with a minimum amount of Rs 1,000. People above 60 years, or those who have opted for VRS (voluntary retirement scheme) within the age bracket of 55-60 years, and retired defence personnel over the age of 50 can opt for this scheme. The scheme matures at the end of  ..

Post Office Monthly Income Scheme (POMIS)
This scheme is offered by the Indian Postal Service. It allows investors to receive monthly income in the form of interest. The interest rate is decided by the Government and it is a low risk profile. An adult, a guardian ( on behalf of a minor) can open a monthly income scheme. The maturity term under the scheme is 5 years. A single account holder can invest upto Rs 4.50 lakhs, while a joint account can invest upto Rs 9 Lakhs. POMIS ..

Tax Free Bonds
Tax Free Bonds are issued by the Government for specific purposes. Its most salient feature is its absolute tax exemption on interest as per Section 10 of IT Act and TDS is not applicable. The principal amount invested in these bonds does not qualify for tax benefit under Section 80C. These bonds generally have long term maturity of 10 years or more and liquidation is not that easy. The government invests the money collected from these bonds in infrastructure  ..

The interest is paid out on an annual basis. Currently prevailing interest rates are in the range of 5% to 6% pa. Some of the tax free bonds are issued by NHAI, Indian Railways, Power Finance Corporation, NTPC, etc.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is retirement-cum-pension scheme announced by the Indian government. The scheme is managed by Life Insurance Corporation of India (LIC). The scheme pays out regular pension at monthly, quarterly or yearly basis (as per the frequency selected). The scheme can be subscribed by Senior Citizens only. The minimum investment is Rs.1.5 Lakhs and the maximum investment is Rs.15 Lakhs for a period of 10 years. The interest rate under t ..

Public Provident Fund (PPF)
PPF Account is one of the most popular long term investment options. The interest earned and the returns are not taxable under Income Tax. A PPF account needs to be opened for this scheme with a post office, or any of the authorised banks and the amount deposited during a financial year can be claimed under Section 80C. The prevailing interest rate on PPF accounts is 7.1% pa. PPF has a minimum tenor of 15 years which can be extended in blocks of 5 ..

Mutual Funds
Mutual Funds help in building wealth over a period of time. Equity Linked Savings Scheme (also known as Tax saving Mutual Funds) has the potential to offer good market linked returns over a lock in period of three years. One can choose an ELSS fund carefully after considering the quantitative and qualitative factors. When the lock in period is complete, the amount can be withdrawn through a Systematic Withdrawal Plan (SWP). This facility is offered by Mutua ..

National Pension scheme (NPS)
NPS Trust is a specialised division of the Pension Fund Regulatory & Development Authority (PFRDA) which is under the jurisdiction of the Ministry of Finance. NPS is a voluntary defined pension contribution system in India. The scheme is available both for government and private employees.The money deposited in NPS is invested in multiple investment options. PFRDA has increased the maximum age for joining the NPS from 65 years to 70 years. T ..

Investment upto Rs. 1,50,000 is eligible for tax deduction under Section 80CCD(1) and investment upto Rs. 50,000 (over and above of Rs.1,50,000) is eligible for tax deduction under Section 80CCD(1B).

The article has been published with the objective to highlight various investment schemes available for senior citizens, the interest rates mentioned in the article are indicative and may vary from actual rates. The investment scheme needs to be referred to in detail to understand the terms ..



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