Special Tax Saving Methods for Senior citizens
Many senior citizens are in the dark about various tax saving instruments that they can use. For those who started on the path of proper tax and wealth planning at an early age, the older years turn out to be the golden age. Others are however not so lucky as they possibly use wrong tax saving financial instruments that offer tax rebates but owing to their high risk nature. With the level of risk taking capacity close to zero at that time, it is better to use investment vehicles that offer safe and sturdy returns while helping in tax reduction. Here is a list of some of popular tax saving instruments that senior citizens can use successfully.
Senior citizen saving scheme (SCSS):
Senior citizen saving scheme (SCSS) is a perfect tax saving instrument for the elderly and is available only for people above the age of 60 years. Senior citizen saving scheme offers 9.3 percent annual returns (paid quarterly) on deposits. The total amount of investment in the Senior citizen saving scheme cannot exceed Rs 15 Lakh. Senior citizen saving scheme (SCSS) qualifies for deduction under Section 80c while the interest gained is taxable.
Bank Fixed Deposits:
Bank Fixed Deposit of 5 years are a wonderful tax saving option for senior citizen offering substantial returns with zero risk. The amount invested in fixed deposits with a maturity period of 5 years in a scheduled bank is eligible for tax deduction under section 80C. However, the interest earned on the deposit is taxable.
Voluntary Retirement:
Money up to Rs 5Lakhs received on account of voluntary retirement is exempt for any income tax claiming such an exemption the employee must have completed 10 years if service of a minimum of 40 years of age. The tax free amount paid at voluntary retirement is limited to either three months salary multiplied by the number of completed years of service or balance months left till retirement multiplied by monthly emoluments.
National Saving Certificate:
National Savings Certificate scheme allows individuals to invest through their nearest post office. Safe and secure, NSC investments are easily available even for senior citizens in rural areas as they as done through post offices. All such investments made under the national savings certificate scheme are eligible for a deduction of up to Rs 1, 00,000 under Section 80C of the income tax act of 1961.
Stay Away from these:
Market Linked Financial Instruments:
The best tax related advice for senior citizens is to stay away from all financial instruments with a high degree of risk. Financial instruments which are related to the equity market like Equity linked Saving Schemes (ELSS) of Mutual Funds. The investment pattern for senior citizens should be such that there is a reasonable and regular flow of income with ease of managing the investment.
Public Provident Fund:
Many financial advisors do not advise senior citizens to indulge in PPF accounts as they are opened for a term of 15 years with further extension of five year periods.
The Income Tax Slab for Senior Citizens:
The income tax slab rates for senior citizens between the ages of sixty to eighty years of age exempt any income up to Rs 2.5 Lakh. The same is extended to 5 lakh for senior citizens above the age of eighty years. Income between 2.5 to 5 Lakh is taxed at 10% while income between 5 to 10 Lakh is taxed at 20% respectively. Any income for senior citizens above 10 Lakh is taxed at the maximum slab rate of 30%.
