At a time when many of us are rushing to save tax at the last minute, some of us might be having senior citizen parents who still fall into the taxable income slabs, and that is why require tax saving.
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If your parents are also rushing to save tax at the last minute or are planning for the upcoming financial year 2024-25 that starts from April 1st 2024, here are some low risk tax saving investment options that can help senior citizens save tax:
Tax Saving Investment Options For Your Senior Citizen Parents
Public Provident Fund (PPF)
PPF, which is administered by the Indian government, is among the most secure investment choices under Section 80C. The sovereign guarantee supports both the principal and the interest components. At the moment, PPF offers an interest rate of 7.1% p.a. compounded annually. The Ministry of Finance reviews this rate every quarter, taking government bond yields into account. To open a PPF, you must deposit at least Rs 500.
The fact that PPF is an EEE (exempt, exempt, exempt) investment gives it a significant advantage over many other tax-saving options. Hence, the PPF investment amount, interest accrued, and maturity proceeds are all tax-free.
The biggest drawback of the PPF scheme is its lock-in period of 15 years, but it does offer some degree of liquidity in the form of facilities through partial withdrawals and premature closure.
Bank Tax-Saver FDs
Bank tax-saving FDs perform exceptionally well in terms of capital protection and return certainty. The Deposit Insurance and Credit Guarantee Corporation (DICGC), a subsidiary of the RBI, insures bank fixed deposits up to Rs 5 lakh per bank and per depositor, including the five-year tax-saving FDs. The bank FD cannot be withdrawn during the five-year lock-in period.
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The largest drawback of tax-saving bank FDs is the interest income’s taxability. The TDS deduction does not relieve bank FD investors of their tax obligations. Even with five-year tax-saving FDs, interest income from FDs is included in your annual income and is taxed based on your income tax slab.
National Savings Certificate (NSC)
NSC is an additional tax-saving, low-risk investment choice. The National Savings Certificate, or NSC, is an investment and savings plan that can be established through a post office. NSCs, which have an interest rate of 7.7% at the moment, can be opened by adults alone or in partnership with a minimum contribution of Rs 1,000. It can also be opened by a minor who is older than ten, or by guardians acting on behalf of minors.
Section 80C permits the claimant to deduct NSC investments from their taxes. After five years from the deposit date, the NSC deposit will mature.
Senior Citizen Savings Scheme (SCSS)
In India, retirees are often searching for programs that provide the highest level of safety and consistent income. Many people believe that the safest senior citizen investment schemes are those that are supported by a sovereign guarantee, meaning they are backed by the Indian government. The Senior Citizen Saving Scheme (SCSS), a program that the Indian government has been offering since August 2004, is one example of an investment.
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SCSS is a savings program supported by the central government. It is a risk-free, fully leveraged instrument. Applicable to individuals over 60, it provides guaranteed income security for the duration of the investment. The maximum investment amount allowed in SCSS is Rs. 30 Lakh. Current interest rate for SCSS is 8.2% p.a and you can claim an income tax deduction of up to Rs.1.5 lakh under Section 80C for SCSS investment.
