Retirement is the time when people stop working and enjoy a stress free life. The biggest challenge is managing the retirement corpus, so that it doesn’t run out. Given below are some tax efficient investments for the retired, to provide for the monthly household expenses.
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The Senior Citizens Savings Scheme (SCSS) is an investment scheme for senior citizens, who want to earn an interest income. It is a safe investment option that also offers tax benefits. The maximum investment in SCSS is Rs 15 Lakhs and is available through banks and post offices across India.
The SCSS scheme can be availed for a maximum of 5 years and can then be extended for a further 3 years. Currently, the rate of interest offered for senior citizens savings scheme is 8.7% 2018-19 (Q3), which makes it an ideal investment option. This is an effective long-term savings option which offers security and added features that are usually associated with any government-sponsored savings or investment scheme.
However, while the investment made under Senior Citizens Savings Scheme (SCSS) enjoys tax deduction under Section 80C of the Income Tax Act, 1961, the interest earned is added to your taxable income and taxed as per tax brackets.
Senior citizen savings schemes are one of the best investment options for retirees. As retirees will want to earn more income in retirement, saving in SCSS makes sense. There are other benefits of investing in this scheme as well. They are as follows:
The government has devised income tax slabs, keeping in mind the needs of senior citizens. Senior citizens enjoy tax exemption up to Rs 3 Lakhs. Normal citizens (under 60 years), enjoy a minimum tax exemption up to Rs 2.5 Lakhs a year. Super-seniors enjoy tax exemption up to Rs 5 Lakhs. Senior citizens enjoy TDS exemption of up to Rs 50,000 a year on interest income from FD.
Listed below are a few tax benefits enjoyed by senior citizens as per the income tax act, 1961:
A health insurance cover is very essential for senior citizens as it provides the much needed hospitalisation cover and treatment expenses. Availing Health Insurance is a smart option as it not only covers medical costs, but is also a tax saving avenue for senior citizens. In case of emergency hospitalization, a health insurance cover takes care of all your medical expenses. The deduction limit for senior citizens under Section 80D has now been increased from Rs 30,000 to Rs 50,000 a year on premiums paid for health insurance plans. If a senior citizen is paying for the health insurance premiums of a very senior parent, he/she is eligible for an additional exemption of Rs 50,000 a year.
SEE ALSO: Income Tax Saving Tips
Post office offers a monthly investment scheme called POMIS, which is a popular scheme that can help retirees earn a monthly income for lifestyle expenses and healthcare costs. It is highly reliable and one of the best investment options for people who are looking for a constant source of income.
It is a low-risk monthly income scheme and generates a steady income. You can invest up to Rs 4.5 lakhs individually or Rs 9 lakhs jointly, for an investment period of 5 years. The current Post Office Monthly Income Scheme interest rate is 7.8% a year and the interest is paid on a monthly basis.
The interest income can be directly credited to the savings account at the same post office. Upon maturity, the investor gets back the principal, but the interest income is fully taxable. However, it is a good investment option for retirees who do not want to lock the retirement corpus in fixed deposits.
SEE ALSO: New Tax Rules Which Help To Save Tax
The key features of the POMIS scheme are mentioned below:
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