Tax efficient investment tools for retirees

Adhil ShettyBankBazaar.comAn elderly person who has just retired from active work has lived a life fulfilling various obligations. From his tax obligations to obligations towards his or her family, co-workers and life in general, retirement is the time to live a peaceful and content life. Investments for the retirees are significant as it can provide them with ample funds for a sustained living and an emergency corpus in case of any medical need or other emergency. There are many investment options available for retirees that cut out the unnecessary worry of tax obligations. Let us look at various investment options that retirees can explore to make their investment tax free and overall tax efficient.Public Provident Fund: Public Provident Fund or PPF is a statutory scheme of the Central Government of India offering a tax-free interest at 8.8% as well as tax saving benefit under Section 80C.Public Provident Fund is an ideal investment opportunity for the seniors. The downside however is that public provident fund investments are subject to a maximum eligible amount of Rs 1, 00,000 per annum.Senior Citizen Saving Scheme: Senior citizen saving scheme is available for all senior citizens above the age of 60 years offering 9.3 percent annual returns on deposits. The total amount of investment under the scheme is capped at Rs. 15 Lakhs. Senior citizen saving scheme (SCSS) however offers tax deduction under Section 80c although the interest gained is taxable.

Post Office Monthly Income Scheme: A Post of Monthly Income Scheme (POMIS) offers a secure investment option for the elderly. Post office Monthly Income Scheme is a risk free investment option which makes it lucrative for the elderly. Any individual can open a Post office Monthly Income Scheme (POMIS) account with a minimum investment of Rs. 1500 or its multiples thereafter. The rate of interest offered by Post of Monthly Income Schemes is usually better than fixed deposit interest rates. Unlike a fixed deposit investment any investment in Post of Monthly Income Scheme does not warrant for any tax deduction at source. However there is no tax rebate available for investments done under the Post of Monthly Income Scheme. Deposits under the scheme are exempted from wealth tax while giving the option of reinvesting of matured amount to the investor.Reverse Mortgage Loan: Reverse mortgage loan is not exactly an investment tool but can be considered as a retirement benefit tool for the elderly. In case the elderly do not have a retirement plan are seek funds or a regular income, mortgaging their residential property to the bank can avail a monthly, quarterly, annually or a lump sum amount to the tune of 90% of the property price. Since a reverse mortgage loan is a loan and not any income, there is no tax obligations on money received through a reverse mortgage loan. Long Term Capital Gains from Stocks / Equity and Balanced Funds: Any long term capital gains from equity stocks, equity mutual funds and even balanced mutual funds are tax free, making them a good investment option for the elderly. The downside of such investments is the fact that being market linked investment options, equity funds and stocks are highly volatile and risky as investment vehicles for the elderly. It is imperative to note that any dividends from stocks and equity mutual funds is also tax-free but short term capital gains or profits earned by selling such shares or funds within one year of purchase attract 15% tax obligations.However, Tax saving should not be your top priority in the retired years, but a steady cash flow is. With the help of a chartered accountant you can work out a tax saving plan, but try never to put a toll on your finances with an aim to save tax.BankBazaar.com is an online marketplace where you can instantly get the lowest loan rates , compare and apply online for your personal loan, home loan, car loan and credit card from India's leading banks and NBFCs.