These schemes are no less than a boon for senior citizens, they will get benefits up to Rs 1.5 lakh along with earnings!
Tax saving is an important component of financial planning. Thoughtful tax planning not only helps individuals meet their financial needs but also reduces tax liabilities. Financial planning becomes even more important during retirement. Tax planning has become necessary to grow one's wealth, especially for senior citizens. It is important for them to invest in low-risk and tax-saving solutions. Even after retirement, senior citizens must make annual tax payments.
It is essential to find out the best savings options to reduce tax liability after retirement. In this article, we will discuss options that can help senior citizens reduce their tax liability. It is important to note that these benefits are applicable only to individuals filing returns under the old tax system and not under the new system.
Tax Saving Fixed Deposit
Under Section 80C of the Income Tax Act, senior citizens can save tax on investments made in tax-saving fixed deposits (FDs). Investors in such FDs can save a maximum of Rs 1.5 lakh annually. Senior citizens earn good returns on tax-saving FDs in the form of monthly, quarterly, half-yearly or annual interest. The best part is that senior citizens get competitive returns on these FDs, and the lock-in period is five years.
Public Provident Fund
When it comes to tax saving, the Public Provident Fund (PPF) is a favorite scheme for senior citizens. This government-backed scheme is a safe investment. Investing in PPF can save up to Rs 1.5 lakh annually. The durability of PPF is its best feature and the maturity is 15 years, with the option of renewal every five years.
Tax free bond
Investors in tax-free bonds are exempt from income taxes, making them a form of fixed-income investment. These bonds are issued by public sector enterprises, government corporations, municipal corporations and other infrastructure firms. They provide safe investment options that provide investors with annual fixed-interest income, which is tax-free. On maturity, the principal amount is returned like any other bond. These bonds are issued by entities like NHAI, REC and Power Finance Corporation (PFC) with excellent security ratings.
Equity-Linked Savings Schemes (ELSS)
For those seeking high returns and significant tax benefits, Equity-Linked Savings Scheme (ELSS) is an excellent option. Currently, ELSS funds aim to generate consistent returns rather than stable returns. Under Section 80C, investments up to Rs 1.5 lakh in ELSS funds are eligible for tax benefits. The three-year lock-in period for ELSS makes it a better option than tax-saving FDs, providing liquidity and higher return potential.