What Are The Best Tax Saving Schemes For Senior Citizens

What Are the Best Tax Saving Schemes For Senior Citizens

Various tax benefits and investment plans urge Indian senior citizens to plan their retirement. The blog explains them in detail.

Written by : Raman Sharma

Reviewed by : Gaurav Nagpal

Gaurav Nagpal

2023-04-22

1686 Views

7 minutes read

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Investment is a major consideration when doing financial planning across every age group. You should begin investments early on in life to ensure you do not face any financial difficulties in your later years. Different investment plans are preferred by different kinds of investors.

Some investors prefer to invest in equity funds, which offer high returns but are also extremely risky, owing to their dependence on market conditions. Meanwhile, other investors prefer low-risk government security bonds, which ensure steady returns over the investment term.

Age also has a considerable role to play in investors deciding which instruments to invest in. For instance, younger members of the population would consider investing in high-risk market-linked equity funds because they have fewer responsibilities and can afford the risk.

However, the older a person gets, their responsibilities increase and they might want to invest in less risky instruments since they can’t afford to lose money.

For investors who plan ahead, there are several investment options available that help them save up for their retirement years and ensure a comfortable standard of living. With the Canara HSBC Life Insurance Invest4G Plan, investors can start saving up from the time they are 28 years old and ensure a secure retirement period. The Invest4G Plan is a Unit Linked Insurance Plan (ULIP) which lets you invest your funds while also securing yourself with adequate life insurance coverage.

Aside from this, there are several tax savings schemes that are available only for senior citizens to invest in in India. Read on to learn more about these.

Table Of Content:

Best Tax-Saving Schemes for Senior Citizens

The best tax-saving investment options for senior citizens in India include Equity Linked Savings Schemes (ELSS), tax-saving fixed deposits, the Public Provident Fund (PPF), and tax-free bonds. These investment vehicles offer a combination of tax benefits, steady returns, and low risk, making them well-suited for retirees and those nearing retirement. When choosing the best tax-saving investment for their needs, senior citizens should consider factors such as risk tolerance, investment horizon, and liquidity requirements to build a well-diversified portfolio that meets their financial goals. Here are some of the best investments for senior citizens:

1

Senior Citizens Savings Scheme (SCSS)

2

ELSS Mutual Funds 

3

National Pension System (NPS)

4

Pradhan Mantri Vaya Vandana Yojana 

5

Public Provident Fund (PPF)

6

Tax Saving Fixed Deposits 

7

Insurance Premiums

8

Tax-Free Bonds 


1.  Senior Citizen Savings Scheme (SCSS): One of the most popular investment instruments and senior citizen tax saving schemes gaining returns on their investments, the SCSS is specially created for Indian citizens above the age of 60 years. It offers an interest rate of 8.2% per annum (Q1 FY 2024-25). The accounts under this scheme can be opened at any post office or bank that deals in the product, and the maximum amount that has to be deposited is ₹15 lakh. While the tenure period is typically for 5 years, it can be extended up to an additional 3 years once the scheme hits maturity. Senior citizen saving scheme tax benefits on this investment are available under Section 80C of the Income Tax Act, 1961, also known as the 80c deduction for senior citizens. The tax however, does not cover the interest earned on the investment and that is charged as per the applicable tax slab.

Did You Know?

Upon meeting all the requirements, retired members of the Defence Services (except from those employed by the Civilian Defence) may open an account upon reaching the age of 50.

Claim Settlement Ratio

2. National Saving Certificate (NSC): NSC is another investment instrument that has gained immense popularity among senior citizens who are looking to invest in tax-saving investments. The NSC is another fixed-income investment instrument available at post offices, and anybody can invest in it. It is relatively low risk and the investment tenure extends up to 5 years. The scheme has a guaranteed return at the rate of 7.7%. Compounded annually, the interest is accumulated and handed to the investor along with the principal amount, on which there is no cap, at the time of the fund’s maturity. Tax benefits are available under Section 80C of the Income Tax Act, with deductions available every single year when the interest amount is reinvested into the scheme. The only taxable component under this scheme is the final payout.

3. Bank Fixed Deposits: Bank fixed deposits are secure investment instruments that are popular among investors looking to make low-risk instruments while also earning steady returns. Fixed deposits can be made across different banks, which also offer higher rates of interest on these investments for senior citizens than other investors. Under Section 80C of the Income Tax Act, bank fixed deposits with a 5-year tenure are eligible for tax benefits. While interest income earned from fixed deposits, interest income earned up to ₹50,000 is tax exempt for only senior citizens. Various banks offer different interest rates on their fixed deposits. It ranges between 5.75 to 7.25 percent.

4. Insurance Premiums: Insurance always forms a major part of everybody’s investment plan, owing to the multifaceted benefits it offers to policyholders. Health insurance is one of the most required types of insurance, as it can significantly reduce the medical bills incurred at the time of illness. What makes insurance even more popular is the tax benefits available on the premiums paid towards health insurance. Even the Invest4G Plan can help you save taxes while also investing towards coverage for your life and earning returns on your investment funds.

Wrapping Up

There are several tax savings schemes available for senior citizens, but it is necessary to pick the best scheme in accordance with your individual requirements. Depending on whether or not you require a fixed tenure for the investment, and how much risk you are willing to take, you can prepare your customised investment plan. Popular tax saving schemes for senior citizens are the National Pension System, a government-sponsored long-term pension plan, and the elderly Citizen Savings Scheme, which provides a greater interest rate than standard savings accounts. Elderly people should carefully consider their financial needs and goals before choosing a scheme, as each one has distinct features and advantages of its own. A financial advisor can help you navigate the process and make an informed decision, therefore it is advisable to seek their counsel.

Glossary:

  • Tax Slab: The income range covered by income tax is known as the "Income Tax Slab." These slabs are subject to annual changes.
  • Government Security Bonds: Low-risk investment instruments issued by the government that provide steady returns.
  • Investment Horizon: The total length of time that an investor expects to hold a security or a portfolio.
  • Liquidity Requirements: Assets need to be easily converted into cash without significant loss of value.
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FAQs related to Investment Options for Senior Citizens

Senior citizens in India can save taxes in a number of ways, such as through pension funds, public provident funds, insurance premiums, equity linked savings plans, tax-free bonds, and tax-saving fixed deposits.

There are several senior citizen tax saving schemes in india such as:

  • ELSS Mutual Funds
  • Tax-Savings Fixed Deposits & Recurring Deposits
  • Tax-Free Bonds
  • Pradhan Mantri Vaya Vandana Yojana
  • National Pension System (NPS)
  • Insurance Premiums
  • Public Provident Fund (PPF)

Indian nationals who are older than 60 are eligible for senior citizen tax saving schemes. 55–60 year old retirees who choose to invest in either superannuation or the Voluntary Retirement Scheme (VRS), provided they do so within three months of starting to receive retirement payments.

Declared in Budget 2023, you can now deposit up to ₹30 lakh with the SCSS. Spouses can keep using the SCSS account after the death of the account holder by contacting the accounts office (a post office or bank branch where an account is created). They can also continue to be the only nominees under the scheme.

Under section 80C of the Income Tax Act, 1961, the principal amount deposited in SCSS is entitled for a tax deduction of up to ₹1.5 Lakh annually. Interest on SCSS is subject to taxation based on the individual's appropriate tax slab.

You should prioritise government-backed guaranteed return programmes. Senior Citizen Savings Scheme (SCSS), Pradhan Mantri Vaya Vandana Yojana (PMVVY), and Post Office Monthly Income Scheme (PO-MIS) are these offerings. Up to ₹34.5 lakh is the most that one person can invest jointly.

Yes, a 70-year-old should consider investing, but the strategy should be tailored to their specific financial situation, risk tolerance, and goals. At this stage, preserving capital and generating income often take precedence over growth. Conservative investments such as bonds, dividend-paying stocks, and annuities can provide stability and income.