As we move closer to retirement, we need to start paying more attention towards our finances and more importantly, towards our savings. In fact, our savings play a major role when it comes to gaining financial independence after retirement.
Pensions and other investment schemes are some of the main sources of income for senior citizens. Most of these income sources are taxable which means that you may have to pay a certain amount of tax on the amount you receive.
However, the Government of India offers a wide range of tax benefits for senior citizens that go a long way in helping them stay financially independent.
This allows them to invest more in saving schemes without worrying about their tax implications. So, here are some popular tax saving tips for senior citizens.
Benefits under Income Tax slab rates
The basic tax exemption limit for any ordinary individual (below 60 years of age) is ₹2,50,000. This means that individuals having an income greater than this amount are liable to pay taxes according to the given slab rates.
As senior citizens (between 60 – 80 years of age) rely on pensions and other saving schemes for their income, the Government of India offers them a tax exemption of ₹3 lakh. Apart from this, super senior citizens (above 80 years of age) also enjoy tax exemption of ₹5 lakh.
Senior Citizen Savings Scheme (SCSS)
This is one of the best senior citizen tax saving scheme. Introduced in 2004, this government-backed saving scheme offers a secure source of income for senior citizens.
The principal amount invested in the SCSS is eligible for tax deductions under Section 80C of the Income Tax Act, with a limit of up to Rs. 1.5 lakh. This Senior Citizen Savings Scheme tax benefit makes it an ideal tax saving scheme for senior citizens.
Also, it is the perfect option for senior citizens who wish to invest in risk-free saving schemes as it ensures a stable and regular income source.
Post Office Monthly Income Scheme
This scheme is available for all individuals above 10 years and is one of the best tax saving scheme for senior citizens. The Post Office Monthly Income Scheme (POMIS) allows senior citizens to take better care of their daily expenses.
It is one of the best options when it comes to tax saving for senior citizens. Also, the POMIS is a low-risk saving scheme that provides senior citizens with a steady and reliable source of income.
Five-year fixed deposit plans
Banks offer various investment schemes that can add to the savings of senior citizens. However, they offer certain fixed deposit (FD) plans that may also help with tax saving for senior citizens.
These FDs offer high interest rates which means that they act as ideal income sources as well. Also, they can opt for tax deductions on a five-year fixed deposit plan which makes it the perfect senior citizen tax saving scheme.
Varishtha Pension Bima Yojana
Apart from being one of the best saving schemes, the Varishtha Pension Bima Yojana also offers various tax benefits for senior citizens.
The premiums you pay under this saving scheme are tax exempted under Section 80C of the Income Tax Act. So, the Varishtha Pension Bima Yojana provides assured income along with some useful tax benefits for senior citizens.
Tax Benefits under Medical Insurance
Getting a health insurance may be one of the best tax saving tips for senior citizens. This is because, under Section 80D of the Income Tax Act, senior citizens are offered tax benefit on health insurance premium of up to Rs. 50,000.
Senior citizens face a lot of medical issues and often need some kind of financial support for their treatments. Therefore, having a health insurance plan allows them to manage their medical expenses and it also offers them an ideal tax saving opportunity.
However, if senior citizens do not have any medical insurance, they can claim deduction under Section 80D on the incurred medical expenses. Here are the scenarios under which tax benefits can be claimed on the premium paid for health insurance.
Deduction under Section 80D
For Self and Family (All members below 60 years of age)
For Self + Family + Parents (All members above 60 years of age)
₹25,000 + ₹25,000 = ₹50,000
For Self + Family (All members below 60 years of age) + Senior Citizen Parents
₹25,000 + ₹50,000 = ₹75,000
For Self + Family (Eldest member above 60 years of age) + Senior Citizen Parents
₹50,000 + ₹50,000 = ₹1,00,000
PM Vaya Vandana Yojana (PMVVY)
Similar to the Varishtha Pension Bima Yojana, the PMVVY is also an ideal tax saving scheme for senior citizens. This government-backed senior citizen scheme provides a guaranteed payout of pension for a period of 10 years.
Under the Pradhan Mantri Vaya Vandana Yojana, senior citizens can avail tax exemptions on the of up to ₹1,50,000 on the initial premium, under Section 80C of the Income Tax Act.
These were some of the best tax saving tips for senior citizens. Planning for the perfect retirement life begins with investing in saving schemes that offer financial stability along with ideal tax benefits.
Also, the Government of India has launched various schemes for the benefits of senior citizens. These schemes offer seniors a chance at experiencing financial independence even after retirement.
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