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Half of the financial year has passed. We still  have time to plan tax saving investments for the fiscal year 2021-22. Senior citizens should start exploring all the available tax-saving opportunities to avail deductions of up to Rs 1.50 lakh under section 80C of the Income Tax Act, 1961. Senior citizens have multiple options to save this amount through different investment instruments. Money9 offers some idea for seniors through which one can save tax wisely as well as grow his/her money.

Senior citizen savings scheme

Senior Citizen Savings Scheme (SCSS) is a good tax-saving option for a person above the age of 60. It is government-backed and specifically designed for the empowerment and financial security of senior citizens. Currently it offers 7.4% yearly return.

The maximum lump sum deposit allowed under SCSS is Rs 15 lakh and the minimum is Rs 1,000. It is also eligible for deduction up to Rs 1.50 lakh per annum under section 80C. Interest earned under SCSS is payable on a quarterly basis, i.e. four times in a fiscal year.

Earning interest

Interest earned through fixed deposits, recurring deposits or any other deposit is taxable beyond a certain limit. Interest earned on bank deposits is exempt up to Rs 50,000 annually as per the provisions of section 80 TTB. For senior citizens aged between 60 and 80 years, the exemption limit is Rs 3 lakh, and for those over 80 years, the limit is at Rs 5 lakh.

ELSS

Equity Linked Savings Scheme (ELSS) are also known as tax-saving mutual funds. But they have a lock-in period of minimum three years. Other fixed income tax-saving plans such as National Savings Certificates, tax-saver bank FD or Public Provident Fund etc, ELSS can offer better market-linked return in three years because it is linked to the equity markets. The risk, too, is a bit higher compared to NSC, PPF and FDs.

PPF

One can save up to Rs 1.5 lakh a year through PPF. But due to the maturity period of 15 years it is not a very popular instrument after 60. But if any senior citizen wants to invest in PPF, or continue investing in exiting accounts, he/she can take the advantages. PPF currently offers 7.1% yearly interest.

Fixed deposits

In tax saver FD one can invest a minimum amount of Rs 100 or its multiples, with a maximum limit of Rs 1.50 lakh in a financial year. But these FDs have a lock-in period of five years. A senior person can choose between quarterly payout and monthly payout plan as per liquidity needs.

Tax saver five-year FDs come under section 80C of IT Act.

Bottom line

“If you are above 75 years you may not file IT return. It is not mandatory if pension and interest income are the only source of the person’s annual income,” said Arvind Agarwal, an IT expert.

Besides, one can also take a health insurance cover or more as health insurance covers come under section 80DDB of the IT Act up to a maximum limit of Rs 1 lakh in a year, he added.

Tax calculation of a senior citizen is very important and one has to make tax-saving investments wisely. Selecting the right retirement plan which gives you both the benefits of saving and growing your money, Agarwal told Money9.