Tax Saving Tips for Seniors: How to Choose the Right Tax Saving Options for Seniors

The investment world has lucrative programs offering multiple investment options. Important factors to keep in mind before investing are the investment objective, age, time to need money, and risk appetite. Seniors need investment options that allow them to enjoy their retirement. Their hard-earned money needs investments that can deliver:
  • Security of capital
  • Steady growth in wealth (low to medium risk investments)
  • Regular monthly income

At the start of each fiscal year, people begin to explore all of the tax savings opportunities available to claim deductions of up to Rs.150,000 under Section 80C of the Income Tax Act. .

Investment options for seniors

There are different types of investments through which seniors can manage their wealth. Some plans offer regular monthly income, while others offer wealth creation. The choice of investment depends on the investment objective.

Term deposits for seniors

These are term deposits with special interest rates offered by banks to seniors. The interest rate is usually 0.5% per annum higher than normal interest rates. The regular payment option can help the elderly with a steady stream of income. It ranks among the best in terms of liquidity. Elderly people can also benefit from a tax benefit under section 80C if it is a 5-year fixed deposit. Under Article 80TTB of the IT Law, interest income up to Rs. 50,000 for seniors during a financial year is exempt from tax.

Seniors Savings Plan (SCSS)

SCSS is a government-backed retirement savings program. The plan has a maximum limit of Rs 15 lakhs or the pension corpus, whichever is less. The account can be opened with a minimum amount of Rs 1,000. People over 60, or those who have opted for the VRS (voluntary retirement scheme) in the age group of 55-60 years, and military personnel Retirees over 50 can opt for this scheme. The plan expires after 5 years and can be extended for another 3 years. The current applicable interest rate is 7.4% pa. Elderly people can also enjoy a tax benefit under Article 80C on investment, but interest is taxable based on the qualifying tax bracket.

Postal Monthly Income Plan (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 plan’s maturity is 5 years. A single account holder can invest up to Rs 4.50 lakhs, while a joint account can invest up to Rs 9 Lakhs. POMIS does not offer any tax benefit under section 80C and interest is taxable. The current interest rate under the scheme is approximately 6.6% per annum.

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Tax-free bonds


Tax-free bonds are issued by the government for specific purposes. Its most important feature is its absolute tax exemption on interest in accordance with Article 10 of the Data Protection Act and TDS is not applicable. The principal amount invested in these bonds does not give the right to a tax benefit under Article 80C. These bonds usually have a long term maturity of 10 years or more and liquidation is not that easy. The government invests the money collected through these bonds in infrastructure and housing projects.

Interest is paid annually. The interest rates currently in force are in the range of 5% to 6% per year. Some of the non-taxable bonds are issued by NHAI, Indian Railways, Power Finance Corporation, NTPC, etc.

Pradhan Mantri Vaya Vandana Yojana (PMVVY)

PMVVY is a retirement and pension scheme announced by the Indian government. The scheme is managed by Life Insurance Corporation of India (LIC). The scheme pays a regular pension on a monthly, quarterly or annual basis (depending on the frequency chosen). The device can only be subscribed to by seniors. The minimum investment is Rs.1.5 Lakhs and the maximum investment is Rs.15 Lakhs for a period of 10 years. The plan’s interest rate for fiscal years 21-22 is 7.4% per annum. Deposits made under the scheme may benefit from article 80C, but interest received under the scheme is taxable.

Public provident fund (PPF)

One of the most popular long-term investment options is the PPF account. Interest earned and returns are not subject to income tax. A PPF account must be opened for this program with a post office or one of the authorized banks and the amount deposited during a fiscal year can be claimed under section 80C. The interest rate in effect on PPF accounts is 7.1% per annum. The PPF has a minimum duration of 15 years which can be extended in 5-year increments. It allows a maximum investment of Rs.1.50,000 in a financial year.

Mutual fund

Mutual funds help build wealth over a period of time. The Equity Linked Savings Program (also known as Tax Savings Mutual Funds) has the potential to deliver good market-linked returns over a three-year lock-in period. One can choose an ELSS fund carefully after considering both quantitative and qualitative factors. When the blocking period is over, the amount can be withdrawn via a systematic withdrawal plan (SWP). This facility is offered by Mutual Fund Houses which generates a regular cash flow to meet retirement expenses. A tax benefit under Article 80 C of a maximum amount of INR 1 50,000 is available for investment in ELSS funds.

National pension scheme (NPS)

NPS Trust is a specialized division of the Pension Fund Regulatory & Development Authority (PFRDA) under the Ministry of Finance. The NPS is a voluntary defined contribution system in India. The program is available to both government and private sector employees. The money deposited in the NPS is invested in several investment options. The PFRDA has raised the maximum age for joining the NPS from 65 to 70. The plan allows subscribers to contribute regularly during their working life. Upon retirement, policyholders can withdraw part of the corpus as a lump sum and use the remaining corpus to purchase an annuity to ensure regular income after retirement. The subscriber can invest up to Rs 2 Lakhs in the program.

Investment up to Rs. 1 50,000 are eligible for tax deduction under Article 80CCD (1) and investment up to Rs. 50,000 (in excess of Rs. 1 50,000) are eligible for the tax deduction under section 80CCD (1B).

The article was published with the aim of highlighting the different investment programs available for seniors, the interest rates mentioned in the article are indicative and may differ from the actual rates. The investment program should be mentioned in detail to understand the terms, conditions and the actual interest rate offered at the time of investment.

(Ruchika Bhagat is Managing Director (MD) of Neeraj Bhagat & Co., an ISO 9001: 2008 UKAS certified organization, founded in 1997. Ruchika graduated in 1996, Fellow of the Institute of Chartered Accountants of India (ICAI) since 1998. She specializes in business consulting, tax, regulation and risk. She is a strategic advisor in setting up businesses in India for foreign companies and ensuring compliance.)


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