Senior Citizens and Income tax planning

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Senior Citizens and Income tax planning

Old age need not be the end of your active life when it comes to spending your money wisely and saving on Income Tax. Typical components of income for Senior Citizens include pensions, HRA income, interest earned on Fixed Deposits, capital gains on assets, debt and equity instruments and income earned from business or profession. These must be accounted for in your online ITR forms

Senior Citizens and Income tax planning

According to 2011 Census data, the percentage of the elderly in India’s population rose from 6.0% to 8.0% between 1991 and 2011. This is owed to expansion in education, health infrastructure and consequent increase in expectancy of life.

Retired senior citizens need to plan their income taxes very carefully to maintain a continued flow of income and an accumulated sum to fall back on during health emergencies. If you are reasonably healthy and avoid regressive physical habits such as smoking, alcohol, overeating and so on, you end up increasing your liabilities. This is because you are likely to possess a longer lifespan to bear expenses over.

You can increase your tax savings by not letting them remain idle and investing in a balanced portfolio comprising of a fixed income alongside a portion in market-linked investments.

Income Tax Saving Instruments for Senior Citizens

  • One of the safest and most popular investments is a Senior Citizen Savings Scheme offered by most post offices and banks to cut the rates on your annual income tax.
    You can invest Rupees 15 lakh at the most but you are allowed to open more than one account.
    Until September, 2017, the interest rate on SCSS was 8.3 % and attracts income tax under the head: ‘Income from other sources’. Your money will remain locked in for 5 years typically.
    Those who retire before the age of 60 can also avail of these benefits provided they subscribe within 3 months of receiving their accumulated savings. Subscription to such a scheme is eligible for tax deductions on income according to Section 80C of the I-T Act.
  • The Post Office Monthly Income Scheme is another attractive 5 year term deposit investment. If you hold a subscription with your spouse, then you can invest a maximum of Rupees 9 lakh in this instrument. If you hold the subscription alone then you can invest at the most Rupees 4.5 lakh here. Interest rates range between 7 and 8 percent in 2017. Interest earnings are taxable.
  • Ordinary Fixed Deposits: These have been a popular investment vehicle for most retirees for a long time. Although interest rates on FDs are not as high in 2017 as they were some years ago, at over 7%, they continue to offer a better return on investment than other no-risk options. Only FDs with 5 year lock-in periods qualify for deductions under Section 80C and then only for the year in which the subscription is made. However, banks allow you to offset tax outgoes for the remaining part of the tenure by increasing the effective rate of interest on the FD. This instrument is also typically more flexible in terms of tenure and liquidity of invested funds.
    Interest earnings are taxable.
  • Mutual funds offer a slightly more risky but more inflation-adjusted avenue of investment for parked funds. You should choose a limited percentage of your retirement corpus for this purpose and prefer a mix of large-cap and balanced equities to others. Long term debt Mutual Funds if retained for over 3 years are taxed at 20% post indexation. If you fall in the topmost tax bracket, then this is the preferred choice over bank deposits which attract an income tax rate of 30.9% for the uppermost category.
  • Life annuity or retirement plans offered by life insurance providers offer regular incomes (income tax liable) in return for a one-time deposit or deposits in instalments for a contractually fixed period. This instrument is handy when you expect to outlive the tenure of ordinary investments mentioned above. The period of subscription usually ranges from 10, 15, 20 and so years. But once you invest your capital, although you earn interest you cannot take it back.

Plan your taxes with a professional

Upon receipt and assessment by tax authorities, you may obtain income tax refunds if deductions and exemptions have been properly filled and submitted. CA assisted tax return efilings are the best fit for you if you possess multiple sources of income.  AllindiaITR is one such online platform. Owned and promoted by Corwhite Solutions Private Limited, it is also the producer of one of the most successful efiling tax apps for smartphones in the country.

10 COMMENTS

  1. Very informative blog for seniors people and take care of their financial things.And a very good decision taken for seniors of our nation. Just try to spread this information as much as can. All the best for this work.

  2. This is really helpfull for senior citizen to know about their taxes. with this information we can also pln out future and make our future safe and secure. This would help us to make or finiantial status strong and easy.Thnx for this this really help me alot.This blog is really helpfull for us to know more about senior citizen taxes. This tell us everything that we should know about taxes. This is like a algorithm to fill taxes becaute it tell us step by step how we should fill taxes and yes it is also easy to understand. It tell breifly and accurately about taxes. The best thing about this blog is that we can get every information hear only. we shoud not go on different side to search about itr. Great work keep it up.
    Can you tell me more about retirement plans?

  3. Thank you so much for sharing such a useful information. I will definitely share this with my father and mother because both of them are senior citizens. This post will help them definitely.

  4. Plan your taxes with a professional, your consultant have a great knowledge. this bog is very helpful for senior citizen and take care of their financial. Sir please make blog on mutual fund

  5. This is very important blog for senior citizen, most of the people didn’t know about income tax planning for their future their is strict need of awareness of this future tax plannings and this post complete the work and spread in what different ways they were take care of their financial things through mutual funds, Life annuity or retirement plans. Can you please tell me more about some other retirement plans and pension schemes.

  6. This blog is very useful for the senior citizens of our country as it will help them to understand the process and the advantages they have for filing an ITR for the senior citizens of our country as it will help them to understand the process and the advantages they have. This is a very good thought for the senior citizens of our as they can plan for their income tax returns in advance and can live a easy and sound hassle free future. The best thing about this blog is that we can get all the information in this particular blog and we dont have to linger around to other sites for information. I will definitely share this information with my parents and my friend’s parents as well. This blog even help us to learn how senior citizens can save their income tax. With the help of this blog i can surely say that the senior citizens can manage their pensions in an efficient and in an effective manner. One question though how secure is mutual funds for the senior citizens and how will it help them to save their taxes??

  7. Thanks for your feedback.

    We are glad to know that you found this page helpful. We advise you to sign up on our site to benefit from our best tax related services, such as HRA calculator, Rent Receipt generator, Income tax calculator, NRI tax plan, ITR filing, Expert Assistance, and more.

    You can find more about retirement plans here.

  8. Thanks for your feedback.

    We are glad to know that you found this page helpful. We advise you to sign up on our site to benefit from our best tax related services, such as HRA calculator, Rent Receipt generator, Income tax calculator, NRI tax plan, ITR filing, Expert Assistance, and more.

    You can find more about retirement plans here.

  9. Thanks for your feedback.

    We are glad to know that you found this page helpful. We advise you to sign up on our site to benefit from our best tax related services, such as HRA calculator, Rent Receipt generator, Income tax calculator, NRI tax plan, ITR filing, Expert Assistance, and more.

    You can go through our blog on mutual funds.

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