How senior citizens can save income tax
My dad is a retired person and of course a senior citizen. This year he wants to save income tax by investing some amount in income tax saving scheme and he was looking for various options or methods to save income tax. There are lots of investment options to save income tax but as senior citizen there are many restrictions or problems attached with most of the methods.
I will discuss these problems later on in this article, but first of all let us see what are the income tax slabs for senior citizens.
1. For Senior Citizens (In between age 60 – 80 years) : up to 2.5 lakh no tax
The income tax rates are:
2.5 – 5 lakh = 10%
5-10 lakh = 20%
Above 10 lakh = 30%
2.. For Senior Citizens above 80 years : up to 5 lakh no tax
The income rates are:
5-10 lakh = 20%
Above 10 lakh = 30%
Why many income tax investment options are not suitable for senior citizens?:
In one of my ealier articles, how to save income tax for financial year 2012-13, I have discussed about the various investment options to save income tax. But most of these investment options are not suitable for senior citizens due to one reason or another. Let us discuss these reasons one by one Let us discuss which are these income tax saving instruments:
1. Public Provident Fund (PPF): You can invest up to Rs. 1 lakh in PPF and the rate of return is 8.6% compounded annually. But the lock in period is 15 years, therefore it is not suitable for senior citizen. But if you have previous account then you can extend it for 5 years.
2. Insurance Policies and Unit linked Insurance plans: I do not think so for senior citizen there shoud be insurance plans because the rrate of interest is not so good. But if you have earlier policy then let it be continue.
The unit linked insurance plans have equity markets attached to them and to invest in equity markets, risk is always attached to them and one should invest for long term.
3. Equity linked Saving Schemes (ELSS) of Mutual Funds: The lock in period is 3 years.
As discussed, in equity markets risk is always attached to them and one should invest for long term.
4. Medical Insurance: up to Rs. 20000 for senior citizen. This is good for senior citizens.
5. Bank Fixed Deposit of 5 years (One can not break this FD). This is good option for senior citizen for income tax saving as there is almost zero risk attached with it.
6. Senior Citizen saving scheme (SCSS): This is very good scheme to save income tax for senior citizens. One can invest as minimum Rs. 1000 and maximum Rs. 15 lakh. The rate of interest is 9.3% comounded quartelly. The detail of this scheme can be seen here:
7. National Saving certificate: Another good scheme for senior citizen to save income tax is national saving certificate. One can see the detail here:
Therefore according to me, the best income tax saving methods or options for senior citizens are bank fixed deposits, senior citizen saving schemes, National saving certificate and of course medical insurance.
What is your view about it? Please give your feedback in comment section and of course you can submit your queries regarding saving of income tax for senior citizens in comment section. I will try to solve it. Thanks.
9 thoughts on “How senior citizens can save income tax”
Thanks for the useful information
what about bank recurring deposit scheme. will that help save tax ?
No bank RD is not eligible to save tax.
I am going to retire next year i.e on 31st January 2014.along with Rs.80 lakhs rupees ( PF+Gratuty money). Kindly let me know how I save income tax as per rule of senior citizen of India.
ONGC Base Complex, Godavari Bhavan,
up to 2.5 lakh : no tax
above 10 lakh: 30% tax -Rs. 2000
According to me you should invest in secure 5 years bank FDs (max. rs. 1 lakh)
you should also invest max. rs. 20000 in medical insurance.
Remaining you have to pay tax.
I am 57 years old. Please inform any tax savings methods suitable for me.
G V Ramakrishna
Please search our last articles regarding tax saving. Main methods are PPF, NSC, 5 years FD.
My wife(70 years) gets a pension of Rs.234000/-PA.She has invested Rs.6 lakhs as FD at Canara Bank for 23 Months(from July 2013) Interest payable at the end and rate is 8.5%.Please inform me the income tax due and suggest the way to get exemption from paying it. Thanks.Jagannath