Retirement is a phase one wishes to spend peacefully without any worries. However, your financial needs do not retire with the end of your employment. In fact, as people age, their expenditures, like medical care expenses, tend to increase. So, it’s advisable that you start planning for your future as early as possible. If you’re unsure where to begin, we’ve got you covered. Read on to discover some of the best tax-saving investments for senior citizens in 2023.
How to Get Started?
First and foremost, get in touch with a wealth manager. A good wealth manager can guide you in selecting an investment plan tailored to your needs and goals. They can help you maximise investment returns and manage your finances during market fluctuations. Additionally, they aid you in determining your risk profile and identifying the most suitable investment options.
Mutual Funds
After consulting with a wealth manager, the next step is selecting a suitable retirement investment option. One popular choice is mutual funds, which pool investments from multiple investors and invest in securities such as equities, bonds, stocks, etc. The fund manager invests the investors’ money in various financial assets based on the fund’s investment objective. An example of this would be the Equity Linked Savings Scheme (ELSS), which offers dual advantages of tax saving and wealth creation. The mutual fund sector in India has grown significantly in recent years. More people see the advantages of investing in mutual funds to meet their short-term and long-term financial goals.
Tax-Saving Fixed Deposits
Another popular investment option is tax-saving fixed deposits. Many banks offer tax-saving fixed deposits. These investment options come with a lock-in period of five years and provide tax benefits under Section 80C. The interest rates are set by banks and are determined by various factors like repo rate, liquidity needs, maturity, and investment tenure.
Tax-Free Bonds
Tax-free bonds are one of the most effective tax-saving investment options for senior citizens. These bonds provide regular income and are exempted from income tax. However, tax-free bonds usually have a longer lock-in period and offer lower interest rates. Also, tax-free bonds are backed by the government and, therefore, are low-risk investments.
Pradhan Mantri Vaya Vandana Yojana
In 2017, the Indian government introduced the Pradhan Mantri Vaya Vandana Yojana, a scheme aimed at individuals aged 60 and above. The scheme provides a 10-year plan that guarantees senior citizens a monthly income or pension. Participants can invest up to Rs. 15 lakhs, and the pension amount can range from Rs. 1,000 to Rs. 10,000 per month. The scheme requires a lump sum purchase price and is exempt from Goods and Services Tax (GST) under Section 80 C.
National Pension Scheme (NPS)
The National Pension Scheme (NPS) is a voluntary retirement savings program run by the Pension Fund Regulatory and Development Authority (PFRDA) and backed by the Indian government. Anyone between 18 and 70 years old can invest in the NPS scheme. The investor is eligible for a tax benefit of up to Rs. 1.5 lakhs under Section 80 CCE and 80 CCD. Subscribers withdrawing from their contributions may receive a tax deduction of up to 25%. Additionally, under section 80 CCD, the NPS allows for tax exemption on annuity purchases made after age 60 or for pension.
Life Insurance
Insurance premiums are another great way to secure your and your loved ones’ futures. It is an excellent way to ensure that your loved ones are cared for even after you’re gone. That is why getting proper life insurance is a must. Unit Linked Insurance Plan (ULIP) is one such example that offers insurance coverage as well as an investment opportunity for tax saving. Senior citizens can benefit from a tax deduction of up to Rs. 50,000 under section 80D.
Public Provident Fund (PPF)
Public Provident Fund or PPF is a popular long-term investment scheme that includes a tax-saving feature to assist investors in building a financial cushion for retirement and old age. The interest rate on the balance of the Public Provident Fund is adjusted every quarter. PPFs have a lock-in period of 15 years, and the investor can invest anything between Rs. 500 and Rs. 1.5 lakhs. Partial withdrawals can be made only after the completion of 6 years.
Senior Citizens Savings Scheme (SCSS)
The Senior Citizens Savings Scheme (SCSS) is a government-backed program that provides senior citizens aged 60 or older with a great tax-saving opportunity. This scheme offers impressive returns and is exclusively tailored to senior citizens’ needs. The maximum amount that can be invested in the scheme is Rs. 30 lakhs, and the investor can gain higher interest rates than that of bank savings accounts. SCSS provides tax benefits under Section 80C of the Income Tax Act 1961. Typically, the scheme has a tenure of five years, but it can be extended for up to three years after maturity.
National Saving Certificate (NSC)
The National Saving Certificate is a tax-saving investment scheme backed by the government, which can be opened at any post office. It carries a low-risk rate. Investing in NSC, just like bank FDs and PPF, is a safe and reliable way to save on taxes. It comes with a guaranteed return on investment and is easy to invest in with transparent policies. The individual will receive the full maturity amount when this tax-saving investment scheme matures. It’s worth noting that no TDS is applicable on NSC payouts, but investors are still responsible for paying the applicable tax on them.
Post Office Monthly Income Scheme (POMIS)
Lastly, the Post Office Monthly Income Scheme or POMIS, is another excellent tax-saving investment for senior citizens. It is offered by India Post or the Department of Post (DOP), backed by the Government of India. POMIS is a low-risk investment option offering senior citizens regular monthly income. Its lock-in period is usually five years and comes with the flexibility of transferring from one post office to another.
Final Words
As one enters old age, it is a time to relax and enjoy life. However, it is important to save enough for your retirement. Your wealth manager can help you make an informed decision and assist you in selecting the tax-saving investment scheme that best suits your risk profile and investment goal. The options are abundant, ranging from mutual funds to schemes like Pradhan Mantri Vaya Vandana Yojana, National Saving Certificate and Post Office Monthly Income Scheme. Choosing the best option that suits you is important to ensure a secure future as a senior citizen.
Please share your thoughts on this post by leaving a reply in the comments section. Also, check out our recent post on “PPF, NPS, ELSS, and ULIPs: Where to invest for Tax-Saving?“
