Every Senior Citizen, whether or not he has planned for his retirement, can look at some of the indicative Tax Planning tools picked by Dr. Suresh Surana.
1. Investment in Senior Citizens Saving Scheme (‘SCSS’) as per SCSS Rules, 2019
An individual who has attained the age of 60 years or above on the date of opening of an account or an individual who has attained the age of 55 years or more but less than 60 years and has retired under Superannuation, VRS or Special VRS, can open an account under such scheme. Such person can either individually or jointly with spouse open an account with a post office or a scheduled bank under SCSS. Interest (current rate of interest is 7.40% p.a.) on such account is accrued and paid quarterly. The account can be closed after the expiry of 5 years from the date of opening of the account. The depositor may extend the account for a further period of 3 years. Such Deposits in SCSS qualify for deduction u/s 80C of the Income Tax Act, 1961 (‘IT Act’) subject to the cumulative threshold limit of Rs. 1.5 lakhs p.a.
2. Senior citizens entitled to higher interest deduction on Investment in 5 years Term Deposits
Senior citizens have an alternative option to open a 5 years Fixed Deposit Account with a scheduled bank so as to avail the benefit of deduction u/s 80C of the IT Act. Currently, the interest rates offered by these scheduled banks generally range from 7.00% to 8.00% p.a. It is also to be noted that, interest upto Rs. 50,000 p.a., earned on such term deposit by a Resident Senior Citizen is allowed as deduction u/s 80TTB of the IT Act. A senior citizen can maintain either one or both of the aforesaid mentioned accounts but the maximum cap of deduction that an individual can claim u/s 80C during a particular FY is restricted to Rs. 1,50,000. The investment in such fixed term deposits would be more opportune for senior citizens who are risk averse and are having sufficient liquidity to manage any exigencies such as medical emergencies, etc.
3. Contribute towards National Pension Scheme (NPS)
The Pension Fund Regulatory And Development Authority increased the maximum age for joining NPS to 65 years and accordingly an individual aged between 60 to 65 years can also join NPS and continue upto the age of 70 years in NPS. Such senior citizens may claim a deduction of the contribution made to such NPS within the overall cumulative limit of Rs. 150,000 p.a. Also, an eligible senior citizen who deposits a sum of money in the NPS can claim an additional deduction of upto Rs. 50,000 in a Financial Year, over and above the combined deduction of Rs, 1,50,000 p.a.
4. Procuring a Medical Insurance Policy
According to the provisions of Section 80D of the IT Act, Resident Senior Citizens may avail a higher deduction of upto Rs. 50,000 for payment of premium towards medical insurance policy as compared to other assessees who can claim a maximum deduction of Rs. 25,000 under this section.
Conclusion
Thus, in our opinion, a senior citizen, after taking into account his/her future cash flows, may consider any of the indicative tax planning tools or any other tools, so as to reduce the undesired tax burden. Further, it is also pertinent to note that a resident senior citizen (an individual of the age of 60 years or above) not having any income from business or profession would not be liable to pay advance tax in accordance with S. 207 of the IT Act and accordingly, such senior citizens must take the same into consideration at the time of tax planning.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
