Senior citizens prefer investing instruments that provide regular income and an opportunity to save tax. As per the Income Tax Act, an individual can choose the old or new tax regimes after the end of each financial year. However, they must also select the right tax-saving investment instruments to help them reach their goals effortlessly. Unlike the new regime, the old tax regime provides tax benefits on annual investments in certain financial instruments, offering cash flow or lump sum payments after retirement.

Considering tax benefits, cash flow, and lump sum payments at retirement, one can explore the following investment instruments.

Senior Citizens Savings Scheme (SCSS):

One can open the Senior Citizens Savings Scheme (SCSS) for five years after turning 60. It allows for indefinite extensions in blocks of three years. SCSS offers 8.2 per cent interest and can be opened in post offices and designated banks. Investments in this scheme provide tax benefits up to Rs 1.5 lakh in a financial year under Section 80C of the Income-tax Act. The interest is paid quarterly.

Read here to learn how to open a SCSS account.

Public Provident Fund (PPF):

Public Provident Fund (PPF) is a government-backed small savings scheme that one can open after reaching 18. The scheme has no upper age limit. It provides a guaranteed income with tax exemptions on deposit, interest, and maturity, called the EEE (exempt-exempt-exempt) status. Investments in this scheme provide tax benefits up to Rs 1.5 lakh under section 80C of the Income Tax Act. It has a 15-year lock-in but can be extended indefinitely in five-year blocks.

National Savings Certificates (NSC):

NSC is another popular tax-saving investment instrument. It also offers tax benefits under Section 80C. It has a lock-in of five years and offers 7.7 per cent interest. The interest in the account is paid on maturity.

Also Read: 7 Investment Options For Senior Citizens To Diversify Their Portfolio

Tax-Saver FDs: 

Seniors can opt for tax saver bank FDs or post office time deposits for five years to avail of tax benefits up to Rs 1.5 lakh in a financial year. Tax-saver bank FDs do not allow premature withdrawals. Similarly, five-year post office time deposits provide tax exemptions under section 80C.

Infrastructure Bonds: 

The companies issue infrastructure bonds for infra projects such as roads, airports, railways, bridges, etc. They provide tax benefits under Section 80C with a fixed interest and have a lock-in of 7-15 years. Typically, they have a five-year lock-in; after that, investors can trade them on the stock exchanges.

In conclusion, risk-averse senior citizens can explore these tax-saving investment instruments for regular income post-retirement. Additionally, those in the pre-retirement phase can choose the national pension system (NPS) or equity-linked saving schemes (ELSS) to save taxes.

Also Read: What Purpose Does Section 139 (8A) Of Income Tax Act Serve?