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Guide To Tax Saving Instruments For Senior Citizens

2 min read

One of the primary concerns for many retirees is the availability of enough funds during the later period of their lives. They wish to make the most rewarding and safe investment of their savings with the least tax liability. Some of the best investment options available to senior citizens which offer good returns as well as tax exemption are as follows:

 Senior Citizen Fixed Deposits

    • Funds in fixed deposits are not under the influence of market fluctuations and hence, are 100% secure. The interest rates for senior citizens FD are higher than the FD of regular customers.
    • The FD has a flexible tenure from 12 months to 60 months, which gives them the freedom to select any option as per their need
    • FDs give facility of loan and pre-mature withdrawal
    • Non-cumulative FD is a better option as it provides a regular income in the form of interest pay-outs.
    • Tax saving FD with tenure of 5 years is a good option as the principal amount is eligible for tax exemption. The tax saving FD interest rate is higher than the FD of other customers.
    • The interest amount of Rs. 50,000 or less earned by a senior citizen per year enjoys tax exemption.

Investing For Beginners – Where To Start, Types Of Investments

 Senior Citizen Savings Scheme

    • In this scheme, a senior citizen can invest a sum of Rs. 500 to Rs. 15 lakhs.
    • The initial tenure of this scheme is five years. It can be renewed once, but only for three years.
    • This scheme offers a higher rate of return (around 8.6%) and is a safe investment option.
    • SCSS has a simple application procedure and least documentation. 
  • Post Office Monthly Income Scheme
    • This savings scheme allows a maximum deposit of Rs. 4.5 lakhs under single ownership and up to Rs. 9 lakhs for joint accounts.
    • It offers an interest rate of 7.9% with reliable returns. The interest income is taxable beyond a ceiling of Rs. 50,000.
    • It offers safe and steady returns. 
    • The interest amount can directly go into the savings account of the senior citizen for ease of use.
    • This scheme also has a maturity period of 5 years.
  • Tax-free bonds
    • These are government bonds with absolutely no risk of non-repayment. 
    • It pays a guaranteed interest which is tax-free.
    • The investment period for these bonds can be from 10 years to 30 years.
    • The maximum amount which one can invest in this scheme is up to Rs. 10 lakhs.
  • Debt funds
    • These are mutual funds and are considered a safe investment.
    • These bonds offer high return as well as high liquidity. A penalty will be applicable for pre-mature withdrawals before the minimum investment term. 
  • Invest in health insurance
    • Health insurance provides security against health and medical costs. The premium paid gets tax exemption under Section 80D with a higher limit of up to Rs. 30,000.

These are some of the best short term investment options in India for those who are retired or considering retirement.