4 Investment Instruments That Extend Senior Tax-Benefits

Retirement planning needs to be strong to avoid a shortage of funds in retirement. Those nearing retirement must focus on strengthening their financial background so that they do not have to compromise on their lifestyle. Every penny counts while planning for your future. To save smartly, senior citizens can invest in tax-friendly avenues like Equity Linked Savings Schemes (ELSS) mutual funds, senior citizens savings schemes, etc., to save money on taxes as the Income Tax department allows many schemes for seniors that save a generous amount of tax.

Here are some investment instruments that extend seniors' tax benefits:

Senior Citizens Savings Scheme SCSS

SCSS is a government-supported senior citizens' savings scheme. It allows people aged or above 60 years to invest an amount of up to Rs. 30 lakh. SCSS also extends a tax benefit of Rs. 1.5 Lakh to the investors, which makes this investment attractive for seniors. The scheme offers 7.4 per cent returns subject to change as per government guidelines. The initial tenure of the investment is 5 years, after which the investment matures, giving the investor two choices. The choices lie between withdrawal of the funds or extending the investment in batches of 3 years.

Pension Plans

Pension plans allow senior citizens to get tax benefits while receiving monthly income. Senior citizens have to invest in a lump-sum amount just at the beginning and set the period for which they wish to receive the pension. The pension is credited monthly in your account without being subjected to tax. The year you invest, you are entitled to Rs. 1.5 Lakh of tax benefit on this investment. The return per cent may vary.

Fixed Deposits

Fixed deposits are a popular choice to get passive returns among seniors. Senior citizens get extra 0.50-0.75 per cent on their fixed deposits. The interest received on FDs is fully taxable however, if it exceeds Rs. 50,000, it is exempt from tax. Fixed deposits attract tax benefit of Rs. 1.5 Lakhs for a minimum 5 year fixed deposit.

National Savings Certificate

National Savings Certificate is a safe investment instrument as it is government-supported. It extends 7 per cent interest returns on your investment while offering tax benefits of Rs. 1.5 lakhs. NSCs come with a minimum lock-in period of 5 years. The interest earned is taxable; however, it is reinvested over the years of tenure and qualifies for deduction at the time of maturity.