6 Tax-Saving Government Pension Schemes For Senior Citizens

The more you save in taxes, the more you can save for retirement. Tax-saving instruments, therefore, are a critical component of a retirement savings plan. Just as you invest in growth instruments, like mutual fund systematic investment plans (SIPs), you must also have guaranteed small-savings investment instruments in the portfolio to make it foolproof from market volatility, short-term economic upheavals, and even possible personal financial crises. Government pension schemes can help senior citizens save on taxes and accumulate a bigger corpus at retirement. Several tax-efficient savings instruments are available to ensure financial security at retirement, and here are some of them.

Public Provident Fund (PPF)

PPF is a government-supported small savings scheme where people can contribute monthly or yearly for retirement. It provides 7.1 per cent annual interest and falls in the tax-exempt-exempt-exempt category. This means you get tax benefits up to 1.5 lakh in a financial year, besides tax exemptions on the principal and interest amount at maturity. PPF has a minimum lock-in period of 15 years, after which you can either close the account or extend it in blocks of 5 years indefinitely.

National Pension System (NPS)

NPS is another tax-efficient small savings scheme for retirement. It attracts 9-12 per cent annual returns on the accumulated funds. The minimum monthly and year contributionsare Rs 500 and Rs 1,000, respectively. One can invest up to Rs 1.5 lakh in a financial year in NPS. The scheme also provides tax deductions up to Rs 2 lakh under the Income Tax Acting a financial year. One can withdraw up to 60 per cent of the NPS fund in a lump sum at retirement, and the rest must be used to buy an annuity plan for pensions. For withdrawals, subscribers can either go for a lump sum withdrawal or a systematic withdrawal plan monthly, quarterly, and yearly.

Senior Citizens Savings Scheme (SCSS)

SCSS is a post office savings scheme for senior citizens. Account holders earn guaranteed, risk-free income from the scheme. It can be purchased at designated banks or post offices. The government periodically adjusts the interest rates. It allows tax deductions up to Rs 1.5 lakh under section 80C of the Indian Tax Act, 1962, on deposits in a financial year. The account is transferable across the country. Its initial term is five years, but it can be renewed forever in increments of three years. One can invest up to Rs 30 lakh in the scheme; the minimum is Rs 1,000.

Atal Pension Yojana (APY)

This scheme is available to Indian citizens between the ages of 18 and 40 from the underprivileged section of society. The beneficiary receives a monthly payment of Rs 1000-5,000, depending on the location. Additionally, the nominee receives a pension if the subscriber dies.

Pradhan Mantri Vaya Vandana Yojana

It provides an assured pension for 10 years. The individual must be at least 60 years old to be eligible to purchase the scheme. This 10-year policy provides a minimum pension of Rs 1,000, Rs 3,000, Rs 6,000, and Rs 12,000, monthly, quarterly, half-year, and yearly, based on when the subscriber wants it.