Should you opt for Senior Citizen Savings Scheme?

Have your parents invested in Senior Citizen Savings Scheme (SCSS)? Are they planning to invest more in the scheme? Let us see how this scheme has fared and whether you should continue with it.

SCSS is a 5 year scheme, first introduced in 2004. It became very popular as it offered the highest assured return of 9%. You get paid interest each quarter, thus making it beneficial for senior citizens who have no other source of income.

Besides high returns and safety, you also enjoy tax benefit. Investments up to Rs 1 lakh are deductible under section 80C of the Income Tax Act.

But when it comes to renewal, you can only renew the scheme for maximum of 3 years. Also with the entry of direct tax code, there is no guarantee whether the tax benefit will continue.

Moreover these instruments are highly illiquid. It means you are stuck with the investment till the end of tenure. Now if you need cash on an urgent basis, you are stuck. Moreover SCSS is not transferable. So if you want to shift your investment from one bank or post office to another, you will not be able o do it.

Also for those senior citizens who have high investment corpus, SCSS will not offer high returns. In such instances, these investors are better off investing their funds in slightly riskier options like monthly income plans or balanced funds.

Best Tax Savings Options

We are already in the month of February and very soon March will be upon us. So it is time to think about taxes and how to save them. But which are the best tax savings options available? Here we give you a list of some of the best tax savings options open for you.

  • ELSS: Are you ready to take risks in order to earn high returns? If your answer is yes, then this is the best option. ELSS or equity linked savings schemes are mutual funds with a lock-in period of 3 years and they invest in equities. Here you not only save tax but also get capital growth.
  • PPF: It is one of the best debt products available in the market. It is backed by Government of India and has a lock-in period of 15 years. You get 8% interest on the amount deposited and both interest as well as capital withdrawal are tax-free. However you cannot invest more than Rs 70,000 in any one financial year.
  • Medical insurance: You can get a deduction of Rs 15,000 if you are paying a medical insurance premium for you and your dependants. But if your dependents are your parents, you get further deduction of up to Rs 15,000. If you are senior citizen, your deduction amount goes up to Rs. 20,000.
  • Home loan principal: The principal portion of your EMI will also help you save tax.
  • Life insurance: This investment will not only save you tax but will also give you a peace of mind should you die or are unable to work. Opt for a simple term plan that will give you higher life cover at low premium.
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