Senior citizen taxpayers have limited options because their risk profile is very different. The Senior Citizens’ Savings Scheme is the best tax-saving option for them. It offers 8.5% returns and the interest is paid out every quarter.

The payment dates are the same for all investors, irrespective of when they joined. It is a five-year scheme, and can be extended for a period of three years once it matures. The account can be opened in any post office branch, designated branches of PSU banks and select private banks.

However, there is an investment limit of Rs 15 lakh per individual. Many retirees get around this restriction by gifting money to their spouses for investing in the scheme. Investors who have already hit that limit should look at other tax-saving options such as PPF and NSCs. Delhi-based finance professional Ranjit Rai Grover puts Rs 50,000 into the Senior Citizens’ Saving Scheme and the balance Rs 1 lakh in the PPF every year. “This is the safest tax-saving option for people in my age bracket,” he says.

One good thing about the Senior Citizens’ Saving Scheme is that it can be closed prematurely after one year, although there is a penalty to be paid for such foreclosure. If closed before two years, the investor has to pay 1.5% of the balance in the account. After two years, the penalty is lowered to 1% of the balance.

Smart tip : If you hit the Rs 15 lakh ceiling, opt for senior citizen tax-saving fixed deposits that offer about 8.2% per annum.