Tax saving is an important component in financial planning. By doing tax planning thoughtfully, people can not only fulfill their financial needs but can also reduce tax liability. Financial planning becomes even more important during retirement. Tax planning has become very important for your wealth growth. In such a situation, it is very important for senior citizens to invest in low risk and tax saving solutions. However, senior citizens must make annual tax payments even after retirement.
To reduce your tax liability even after retirement, it is important that you look for the best saving options. Today we will tell you about those options through which senior citizens can reduce their tax liability. The options that we will mention, this benefit is only for those who are filing old tax system returns. The benefit of this scheme is not at all for those who are included in the new tax system.
Tax Saving Fixed Deposit
Under Section 80C of the Income Tax Act, you can save tax on investments made in this type of FD. Senior citizens who invest in such fixed deposits can save a maximum tax of Rs 1.5 lakh annually. Senior citizens earn good income in tax saving FD in the form of interest on monthly, quarterly, half yearly and yearly basis. The best thing is that on these tax saving FDs, senior citizens get good returns as compared to others and the lock-in period is 5 years.
Public Provident Fund
When it comes to tax saving, Public Provident Fund is the most favorite scheme for senior citizens. This is an Indian Government scheme. Which is a completely safe investment. By investing in PPF you can save up to Rs 1.5 lakh annually. The durability of PPF is its best feature. The maturity of the PPF scheme is 15 years, which can be renewed indefinitely at intervals of five years.
tax free bond
In tax-free bonds, the interest income paid to bondholders is exempt from taxes, making them a type of fixed income investment. Public Sector Initiatives, Government Corporations, Municipal Corporations and other infra firms are the institutions issuing these bonds on behalf of the government. These are safe investment options which provide investors with earnings every year in the form of pre-fixed interest. Moreover, investors can save more money as the interest they earn is tax free. On maturity, the principal amount is returned like any other bond. Such bonds are issued by NHAI, REC and Power Finance Corporation (PFC). Their safety rating is excellent.
Equity Linked Savings Schemes
If you are looking for big returns and great tax benefits, Equity Linked Savings Scheme (ELSS) is a great option. At this time, the aim of investing in ELSS funds is to generate consistent returns rather than volatile returns. Under Section 80C, investment in ELSS funds offers tax benefits up to Rs 1.5 lakh. The three-year lock-in period of ELSS makes it better than tax-free FDs, which have a lock-in period of five years. Unlike other types of FDs, tax-saving FDs do not have any liquidity at all. You do not get a loan against those FDs, nor can you repay them very quickly.