4 ideal tax investments for seniors in 2022

Seniors should consider investment options that not only provide risk-free returns, but also allow tax deductions, as tax planning is an important part of wealth-building savings in the golden years. In order to achieve personal financial goals without the need for last-minute tax savings, start saving tax at the start of a new fiscal year. Taxpayers can choose the new tax regime for the financial year 2022-2023 or continue with the old regime, and the basic exemption cap is set at Rs. 3 lakhs for senior citizens aged 60 to under 80 and super seniors over the age of 80 are exempt until 5 lakhs in a financial year. Therefore, in addition to the aforementioned critical points, here are five tax-saving options for seniors that can be considered when investing in the current fiscal year.

Tax-exempt bonds

Tax-free bonds are a wonderful alternative for seniors who want returns above inflation and want a respectable regular income. Since they are issued by government-backed organizations and, as the name suggests, interest income is tax-free, making them risk-free investments for people in higher tax brackets .

Seniors may seek higher or stronger credit ratings, higher liquidity, and yield to maturity (YTM) while investing in tax-exempt bonds issued for 10 years or more. NHPC Limited has been rated AAA by CARE with a STABLE outlook, AAA by ICRA and AAA by IND with a STABLE outlook, demonstrating a significant level of financial stability. The bond has an annual coupon payment frequency, a YTM of 5.5236% per annum and a coupon rate of 8.67% per annum.

Another bond is the tax-free National Thermal Power Corporation (NTPC) bond, which has received AAA ratings from CRISIL and ICRA. The bond was issued on December 16, 2013 and will mature on December 16, 2033. The bond has a YTM of 5.5007% per annum and a coupon rate of 8.66% per annum. In addition, this obligation has an annual payment term. Investors should be aware that although interest on tax-exempt bonds is not subject to income tax, the sale of tax-exempt bonds after 1 year would be taxable according to your income tax plate. income and after 1 year you will pay long term capital gains tax. at 10%.

Fixed 5-year tax savings deposits

Tax-saving term deposits are a type of investment that has a lock-in period of 5 years and prohibits early withdrawals until the account has reached maturity. Under section 80C of the Income Tax Act 1961 tax saving time deposit tax deductions are available up to 1.5 lakhs per exercise. Seniors should take note that tax-saving fixed deposits offer a triple benefit, including risk-free returns, tax deductions, and deposit security by DICGC.

Tax-saving FDs generally offer flexible interest payment options, such as monthly, quarterly, or reinvestment, however, the interest earned would be taxable depending on your tax bracket. Where the interest payable or reinvested for seniors exceeds Rs. 50,000 in a tax year, TDS will be deducted by the bank. You can open a tax FD either in a bank or in a post office. By opening a Postal Term (TD) Account which also offers tax deductions, senior citizens can get 6.70% return over 5 years of deposits and on the other hand, SBI now offers an interest rate of 6.30 % on fixed tax savings rates. deposits.

Seniors Savings Plan (SCSS)

Seniors who wish to receive tax benefits under Section 80C with higher returns than tax-saving DFs may consult the SCSS. A person above the age of 60 can open this account at a post office by making a single deposit into the account in multiples of INR 1,000 with a maximum deposit of INR 15 lakh. Investments made under this scheme are eligible for tax benefits under Section 80C. Currently, SCSS offers a taxable interest rate of 7.4% per annum, which is much higher than the fixed interest rates offered by banks. Interest will be paid on a quarterly basis and will be applied from the date of deposit until the following dates: March 31, June 30, September 30 and December 31. If the total interest earned on all SCSS accounts exceeds Rs. 50,000 in a fiscal year, TDS would be deducted by post. SCSS comes with a 5-year maturity period and after maturity the account can be extended to a 3-year block.

National Pension System (NPS)

The National Pension Scheme (NPS) is a government-backed scheme as it is administered by the Pensions Regulation and Development Authority (PFRDA). The National Pension System (NPS) is a voluntary retirement savings scheme which offers a variety of investment alternatives and a choice of pension funds. The membership limit for the NPS is 18 to 70, and it is a savings plan for all citizens. A subscriber can avail tax benefit under Section 80 CCD(1) up to Rs. 1.5 lac in total under Section 80 CCE. Only NPS subscribers are eligible for additional deduction for contributions up to Rs. 50,000 in NPS (Tier I accounts) under Section 80CCD(1B).

In addition, subscribers benefit from a tax deduction on amounts withdrawn up to 25% of their own contributions. In addition, the NPS allows tax exemption on annuity purchases made after age 60 or on superannuation under Section 80CCD(5). However, Article 80CCD (3) of the tax regime applies to subsequent income from an annuity. In addition, under section 10 (12A) of the Income Tax Act, subscribers are also eligible for a tax exemption on a lump sum withdrawal of 60% of their total pension estate when they reach the age of 60 or reach retirement.

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