Best Income Tax Saving Investment Schemes for Senior Citizens: Income Tax planning is one of the most important financial activities for all taxpayers, including the retired senior citizens. As the time for filing Income Tax Return (ITR) for the Assessment Year 2019-20 comes near, a question that is on every taxpayer’s mind is: “How can I reduce my tax liability”. Reducing tax liability is not always an illegal exercise. It can be done through legitimate means, provided in the Income Tax Act. Senior citizens can reduce their tax liability by investing in some tax saving schemes. Three of them as explained here:
1. Senior Citizens Saving Scheme (SCSS)
Senior Citizens aged 60 years or above can open Senior Citizens Saving Scheme (SCSS) account in any post office.
Individuals aged 55 years or more but less than 60 years, who has retired on superannuation or under VRS, can also open the SCSS account. However, the account should be opened within one month of receipt of retirement benefits and the amount should not exceed the amount of retirement benefits, says the official Post Office website. At 8.7% per annum, the SCSS currently provides one of the highest rates offered on any saving schemes by banks in India.
Effective from January 1 this year, the scheme offers the 8.7 % per annum interest, which is payable from the date of deposit of 31st March/30th September/31st December in the first instance and thereafter, interest is payable on 31st March, 30th June, 30th September and 31st December.
A senior citizen can open only on SCSS account with a deposit in the Rs 1000 and maximum not exceeding Rs 15 lakh. The investment made in SCSS account matures in five years.
2. National Saving Certificate (NSC)
National Saving Certificates can be purchased from post offices. It is another fixed income investment scheme offered by the Government. According to the Post Office website, a single holder type NSC can be purchased by an adult for himself or on behalf of a minor or by a minor. The NSC deposits qualify for tax rebate under Sec. 80C of IT Act. The minimum deposit one can make in NSC is Rs 100 and in multiples thereof. There is no maximum investment limit.
The current rate of interest offered on NSCs is 8%, which is compounded annually but paid only after maturity. At the current rate of interest, Rs 100 investment will grow to Rs 146.93after five years.
3. Tax Saving Bank fixed deposits (FD)
5-year tax saving fixed deposit accounts can be opened at public and private sector banks as well as post offices. The rate of interest differs from one lender to another. The maximum investment of Rs 1.5 lakh can be made in the 5-year tax saving fixed deposit account. For senior citizens, FDs offer 0.5% more interest. The account, however, comes with a lock-in period of five years. The investment in the account is eligible for tax benefit under Section 80C of the Income Tax Act.