Tax saving plan: SCSS and ELSS

In the first part of the story, we discussed a flow chart that can be used to make a quick decision regarding your tax-saving investments options. Now let's continue further and see what are the best tax-saving options available for you as per your needs. Seeking regular income For a regular-income-seeker above 60 years, the automatic choice is the Senior Citizens' Savings Scheme (SCSS). The 7.4 per cent per annum it yields is higher than any other fixed income alternative. It also comes with a sovereign guarantee and gives regular interest. The interest income is taxable, but senior citizens above 60 get tax exemption for up to Rs 50,000 interest earned in a financial year. So, up to Rs 6.75 lakh invested in the scheme will earn tax free interest. Making the income from SCSS completely tax-free has long been on our wish list. It will make this scheme even more attractive. A portfolio made up only of fixed-income investments is not appropriate for an income-seeker. The portfolio must have some equity allocation (we have talked about this often), which can come from one-two conservatively managed diversified equity funds. Even so, the SCSS fits well in the debt allocation

This article was originally published on March 15, 2022.