The phase of retirement is that of relaxation without needing to worry about your financial security. This requires effective financial planning and portfolio management consistently from an early age. However, there are certain specific schemes that will enhance your overall income by reducing your tax obligations under Section 80C, 80D, 80 DDB, etc. Senior citizen health insurance investment is another competent tax-saving avenue.
As an investor, your primary target is to ensure that your investments are enough to offer you a regular income while accumulating a corpus for your post-retirement life. However, for a pensioner, it is most important to ensure the effective directing of your financial portfolio toward mutual funds for long-term wealth accumulation.
However, investors without any pension facility might effectively direct their portfolios, ensuring regular income as well as fund growth after retirement.
Income tax benefits for senior citizens
The government’s approaches and plans for senior citizens depict their love and respect for the people. The government offers multiple tax benefits for various investment options, like investment in senior citizen health insurance, to make their lives less complicated and more hassle-free.
New tax regime rates and slabs for senior citizens for ITR filing in AY 2024-’25 (FY 2023-’24)
- INR 0-INR 3 lakhs: NIL
- INR 3-INR 6 lakhs: 5%
- INR 6-INR 9 lakhs: 10%
- INR 9-INR 12 lakhs: 15%
- INR 12-INR 15 lakhs: 20%
- Above INR 15 lakhs: 30%
You must note that the old tax regime rates and slabs have also remained unaltered in the current year. You can easily take the help of a digital income tax calculator and plan your taxes and investments well ahead of the deadline.
Best tax-saving investment options for senior citizens in India
- Senior citizen fixed deposit
Nearly all NBFCs, corporate houses, and banks offer tax-saving fixed deposit schemes for senior citizens. These special fixed deposits offer a slightly higher rate of interest than the standard ones and are liable to change depending on the discretion of the government and the concerned organisation. These deposit schemes help elderly individuals meet their monthly requirements well.
In a single financial year, the interest income till INR 50000 becomes eligible for tax exemption. Moreover, senior individuals can claim tax benefits under Section 80C of the IT Act for tax-saving fixed deposits.
- Senior citizen’s savings scheme
SCSS is a government-backed investment scheme offering an optimum investment limit of INR 15 lakhs or the concerned retirement corpus, whichever is lower. The average rate of interest for SCSS normally remains higher than that offered by bank savings deposits. Investment up to INR 1.5 lakhs is eligible for tax exemption.
The standard maturity is after 5 years, offering a provision of further extension of 3 years post maturity. However, you must remember that the tax benefit of SCSS never extends to the interest gains, and it is taxable as per the applicable tax regime.
- Post Office Monthly Income Scheme
As the name suggests, this special scheme is offered by the Indian Postal Service department. It allows Indian senior individuals to earn a regular monthly income through interest earnings. An individual person above 60 years can invest up to INR 4.5 lakhs, and through joint holding with the spouse, this limit is INR 9 lakhs.
- Tax-free government bonds
These tax-free government bonds are one of the most attractive tax-saving investment financial tools for senior citizens. The interest earned from this scheme remains completely exempted from tax. These bonds offer a maturity of 10 years for senior citizens. The money earned from these schemes is utilised by the government for several welfare projects. The investor receives the interest once every financial year.
- Pension Plans
To ensure a hassle-free retirement year, a pension plan is ideal. It is offered by several insurance companies that offer a regular source of income. Pension plan investments are eligible to qualify for tax exemption under Section 80C of the IT Act. There are types of pension plans that offer immediate payout.
Atal Pension Yojana is a government-backed pension plan that allows for tax exemption under Section 80CCD of the IT Act. Moreover, certain pension plans even allow the option to include your spouse. This implies that after the demise of the policyholder, the concerned spouse will continue receiving the pension.
- Pradhan Mantri Vaya Vandana Yojana
This scheme has been introduced by the government, and it is one of the best and most popular tax-free investment tools. This is a pension cum retirement scheme. Depending on your choice and applicability, this scheme offers a regular pension, either monthly, quarterly, or annually. This special scheme is managed by the Life Insurance Corporation of India.
Investments under this scheme qualify for tax exemption u/s 80C. the optimum investment limit is INR 15 lakhs which can be made for a span of 10 years.
- Public Provident Fund (PPF)
PPF, or Public Provident Fund, is one of the most popular investment options because of its tax exemption facility, especially among senior citizens. You can easily open it in any bank or post office, depending on your preference. The deposited amount can be claimed for tax deduction u/s 80C of the Income Tax Act, and the interest gains are also exempted from taxation. The optimum tenure is 15 years.
- Equity-Linked Savings Schemes (ELSS)
For corpus building and significant asset growth, ELSS investment is ideal for any senior citizen. ELSS investments are eligible for tax exemption u/s 80C of the IT Act. It comes with a standard lock-in period of 3 years, post which one becomes eligible to withdraw the concerned amount through an SWP or Systematic Withdrawal Plan.
- National Pension Scheme
This is a voluntary pension contribution fund prevalent in the country, offering several investment options. The optimum age limit for joining NPS is 70. On retirement, the individual can withdraw a certain amount from the lumpsum corpus and utilise the remaining for purchasing an annuity, ensuring a regular pension. NPS investments up to INR 1.5 lakhs qualify for tax exemption u/s 80CCD.
- Insurance premiums
As mentioned above, senior citizen health insurance is a solid tax-saving investment option. It offers health protection while protecting your finances too. The medical premiums are eligible for tax exemption u/s 80D of the IT Act, while the life insurance premiums are for 80C. Health insurance plan premiums up to INR 50000 can be claimed for tax exemption.
Conclusion
This article highlights several investment options ideal for senior citizens that ensure tax savings and eventually offer effective portfolio management techniques. Depending on your financial condition and preference, you can begin investing now to secure your retirement era.
Disclaimer: The above information is for illustrative purposes only. For further details, please refer to the policy wordings and prospectus before concluding the sales.
