SENIOR citizens now have a wealth of benefits on investment as well as taxation fronts. The budget has made things easier as the qualifying age for senior citizens has been brought down to 60 years from 65 from the financial year 2011-12. It is essential that senior citizens are able to make the most out of the situation.
This is especially true for all those who were not considered senior citizens earlier but will now find themselves covered under this category.
Here are a few ways to use the various benefits on investment as well as taxation fronts with a little attention to detail: Bank fixed deposit: Individuals who are looking to earn a higher rate of interest on the money they have invested need to take a look at the rates offered by various banks on their fixed deposits.
The advantage of being a senior citizen is that they can get a slightly higher rate of interest on deposits compared with other investors. The extra amount can range from 0.25 per cent to 0.75 per cent depending on the bank an individual is dealing with.
This can ensure that there is a higher income on the funds available with them. Bank FDs are a preferred route for senior citizens as they are a tried and trusted way of investing.
Senior citizen's savings scheme: Another option for investment that opens up for individuals once they cross the 60 years mark is the senior citizen's savings scheme.
This offers an interest rate of 9 per cent, which is payable quarterly for the five-year period for which the initial investment will be locked in.
This ensures that there is a higher earning available for individuals when they touch the age of 60. A maximum amount of Rs 15,00,000 can be invested in this instrument. This route can also be considered when various investment options are being deliberated upon.
Tax benefit on investments: The good thing for senior citizens is that they can actually take a tax benefit in the form of a deduction when they invest in bank fixed deposits as well as the senior citizen's savings scheme.
There are special fiveyear fixed deposit schemes that banks offer, which are known as tax-saving deposits. These ensure that a deduction up to Rs 1,00,000 available when an investment is made into the instrument.
Interest rates offered on these deposits depend upon the rates that are prevailing in the market at a particular point of time.
Even investments made in the senior citizen's savings scheme will get a deduction up to Rs 1,00,000. So senior citizens can ensure that they are investing into these options in such a manner that they are able to save tax and manage investments wisely.
Additional tax benefit: There is also an additional tax benefit that will now be available from the FY12 to those who have touched 60 years as they will be considered senior citizens for the purpose of taxation.
This will ensure that there is the benefit of a higher basic exemption imit that is available for the senior citizens.
For a male individual below 60 years the basic exemption limit is Rs 1,80,000 which will rise to Rs 2,50,000 so the senior citizen can have an additional Rs 70,000 of income without any tax impact.
If the senior citizen is a female then she can have an additional income of Rs 60,000 as compared to someone who is less than 60 years old.
This higher amount of basic exemption should be used effectively by ensuring that the earnings are raised to the maximum possible so that a arger amount can be earned on a net basis.
