PPF To Senior Citizen Scheme: Four Tax-Saving Avenues For Risk-Averse Investors Under Old Regime

In the recent past, there was much debate and doubt about whether the Old Tax Regime would be withdrawn. This is because about 88% of the individual taxpayers migrated to the New Tax Regime – now the default tax regime – and only about 12% are currently opting for OTR.

However, after the Union Budget 2026, the Central Board of Direct Taxes chairman clarified that the old tax regime is not going away anytime soon and that the government is not considering a sunset clause for it.

The OTR is beneficial for those earning a very high annual income (Rs 25 lakh and more), paying home loan EMIs, paying house rent (by availing of the HRA benefit), paying life and health insurance premiums, paying interest on higher education loans (for self, spouse, children, or legal ward), paying children's tuition fees, hostel fees, and consciously making investments among others, wherein the aggravate value of all the deductions is over Rs 8 lakh in a financial year.

Moreover, under the new Income Tax Act 2025 (which comes into effect from 1 April 2026), with a noticeable increase in the upper limits for exemptions, such as for a child's education allowance, hostel allowance, meal allowance, motor car perquisite, plus other cities included in the list of for 50% HRA exemptions, the OTR now seems to have got an edge, particularly for salaried individuals leaving them with a better net take home pay.

As an individual taxpayer, if you are opting for the OTR and are risk-averse by nature, you need to choose tax-saving avenues carefully among a plethora of options available.

Before we go to the tax-saving options, let's understand who can be classified as risk-averse.

You see, a risk-averse individual, in general, is one who:

• Prioritises capital preservation
• Is unwilling to take risks, or the risk appetite has diminished.
• Prefers predictable or fixed returns on investments, avoids volatility and losses
• Is in the conservation and protection phase of life (on the verge of retirement, or already retired)
• Has created sufficient assets but now has a conservative approach
• Does not have a regular source of income
• May not have many assets
• May have responsibilities of dependent family members to shoulder
• Has financial goals to fulfil that are a couple of weeks or months away
• If you have any or many of these traits, you are qualified to be termed as risk-averse.

Here are the tax-saving investments you could consider, which can offer you a deduction of up to Rs 1.50 lakh under Section 80C in the financial year.

Public Provident Fund

PPF is a long-term small savings scheme of the Central Government (framed under the PPF Act of 1968). Investing in it not just helps save tax, but also plans for long-term financial goals, such as your child's future needs (higher education and wedding expenses), your retirement, etc.

Even if you have an Employee's Provident (EPF) Account (wherein you and your employer are making regular contributions), it makes sense to open a PPF account as well so that you can build a respectable nest egg for your golden years.

A PPF account can also be made in your minor child's name with you as the legal guardian. In this case, the guardian is entitled to the deduction (of up to Rs 1.50 lakh) under Section 80C of the Income Tax Act 1961.

That said, as per the PPF rules, only one PPF Account per individual is permitted. Moreover, the PPF account cannot be held jointly.

The tenure of the account is 15 years, and the contributions you make to the PPF account are eligible for deduction, plus earn interest at 7.1% p.a., compounded annually.

Moreover, the interest is tax-free, and so are the maturity proceeds exempt from tax. PPF enjoys an exempt-exempt-exempt (E-E-E) status, making it an attractive long-term savings avenue.

You can make a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh per financial year, either as a lump sum or in up to 12 instalments.

Features of the PPF Account

In the interest of your long-term financial well-being and to keep the PPF account active, it makes sense to make regular contributions to your PPF account.

The plus point is that the government has not changed the PPF interest rate since April 2020, despite the RBI having cut policy rates and a formula suggesting a lower rate. This is mainly to protect the social security of small savers.

If you are planning to make monthly contributions and not invest a lump sum before 31^st March (end of the financial year), make sure you consciously do so, preferably before the 5th of every month. This is because the interest on the PPF Account is calculated on the minimum balance in your account between the 5th and the last day of every month. In short, make sure your PPF Account is credited with the investment amount before the 5^th of every month.

Another interesting aspect of the PPF account is that it cannot be attached by the order or decree of the court in case of any debt or liabilities, as per the PPF rulebook. So, the PPF Account remains safe and yours for life.

5-year Tax Saver Term Deposits

These are offered by various banks (public and private) and India Post. The rate of interest offered by every bank varies. For example, in the case of the State Bank of India (SBI), the interest rate is 6.05 % for general citizens and 6.40% in the case of HDFC Bank. If you are a senior citizen, it is 50 basis points (bps) more.

The interest is compounded quarterly, while for the payout, you could choose from three investment options -- Reinvestment Deposit, Quarterly Interest Payout, or Monthly Interest Payout -- based on your cash flow needs. But in the case of the 5-year National Savings Time Deposit (NSTD) offered by India Post, the interest is paid only annually.

The minimum investment is Rs 100 in the case of banks and Rs 1,000 in the case of the 5-year NSTD offered by India Post.

There isn't a maximum investment limit, but for deduction under Section 80D, it is restricted to Rs 1.50 lakh in the financial year.

These deposits, like other bank FDs, are also insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC) for up to Rs 5 lakh per bank.

The deposits can be held in a single name, or jointly (by two adults or by an adult and a minor). But here the tax benefit is available only to the first holder, who ought to have a permanent account number (PAN).

The 5-year tax saver FD can also be made in a minor's name through a legal guardian. In such a case, the legal guardian can avail of the tax benefit.

The interest earned on both the 5 Year Tax Saver Bank FD and NSTD is taxable as per your income-tax slab. It is initially subject to tax deduction at source as per the provisions of Section 194A of the Income Tax Act, 1961.

Also, you need to keep in mind that a 5-year FD cannot be prematurely encashed / liquidated / withdrawn before the completion of 5 years from the date of receipt. That said, this lock-in, in a way, is good to compound wealth safely and steadily. However, you need to be mindful of your liquidity needs when making a 5-year tax-saving bank FD.

National Savings Certificate – VIII Issue

This is another small savings scheme, floated by the Government of India. Like PPF, the NSC is also amongst the preferred tax saving avenue for conservative investors.

The NSCs come with a 5-year tenure and can be opened with as little as Rs 100 (and in multiples of Rs 100), while there isn't an upper limit.

The certificates can be held in your own name (single), jointly by two adults, or even by a minor (through the guardian).

The 5-year NSC currently offers interest at 7.7% p.a., which is compounded annually and payable upon maturity.

The interest income accrued annually for years 1 to 4 also qualifies for a deduction under Section 80C in the respective financial year. The interest in the fifth year is not reinvested but paid to you on maturity and hence ineligible for a deduction under Section 80C in that year.  

That said, interest earned is taxable as per your income-tax slab. Initially, it is subject to tax deduction at source as per the provisions of Section 194A of the Income Tax Act, 1961.

Note, the NSC cannot be closed before maturity except in the case of the death of the account holder in a single account, or any or all the account holders in a joint account, or other acceptable cases.

Sukanya Samriddhi Yojana

If you are addressing the future goals of your daughter, be it her higher education needs or marriage expenses, the Sukanya Samriddhi Yojana, launched by the Government of India in 2015 (a part of the Beti Bachao, Beti Padhao campaign), is a worthwhile tax-saving avenue.

 As a parent or legal guardian of a girl child, you can open an SSY account in her name, anytime between her birth and the age of ten.

Note, each girl child is permitted only one SSY account, and a family is allowed a maximum of two accounts. However, an exception is made in cases where twins or triplets are born.

The minimum initial deposit required to open an SSY account is Rs 250, and subsequent contributions can be made in multiples of Rs 50, as long as a minimum of Rs 250 is deposited in a financial year.

The maximum yearly deposit limit is Rs 1.5 lakh, and any excess contributions will not earn interest and will be returned.

The SSY account has a total tenure of 21 years from the date of opening, with mandatory contributions required for the first 15 years.

 Until the girl child reaches 18 years of age, the account is managed by the parent or guardian, ensuring that they can oversee the investments effectively.

Once the girl child reaches adulthood, she can take control of the account by submitting the necessary documents.

A one-time withdrawal (up to 50% of the account balance) is permitted when the girl turns 18 or has passed the 10th standard, usually to cover higher education expenses.

Now, in case the account holder gets married before the 21-year maturity period (provided she is at least 18 years old), the account will be closed and can no longer be operated post-marriage.

If the girl child moves abroad and becomes a Non-Resident Indian (NRI). The relevant authorities should be notified within 1 month of the date of the change in the citizenship status.

Currently, the SSY account earns 8.2% interest and, like PPF, enjoys an EEE (tax status, making it a highly tax-efficient scheme for a girl child.

Senior Citizens Savings Scheme

If you are a senior citizen, the Senior Citizen Savings Scheme (SCSS) is your best bet among the government-backed schemes.

Individuals who have attained 55 years of age and retired under a voluntary retirement scheme are also eligible to enjoy the benefits of this scheme.

The SCSS account can be opened in a single or joint name along with your spouse.

The minimum you can invest is Rs 1,000, and you can have multiple SCSS accounts. However, the maximum deposit combined across all SCSS accounts is restricted to Rs 30 lakh.

The investment you make is eligible for a deduction of up to Rs 1.50 lakh under Section 80C in the year in which the investment is made.

The tenure of the SCSS account is 5 years. Currently, the interest rate is 8.2​% per annum, compounded annually, and the interest is paid quarterly.

Other than the attractive rate of interest and tax benefit, SCSS also allows premature withdrawal (before the maturity period of 5 years), recognising that money may be needed to meet an emergency or any other purpose, for that matter. But this is possible only once, not multiple times. 

The interest earned is taxable – initially subject to tax deduction at source.

But with effect from August 29, 2024, withdrawals from the SCSS account are exempt from tax.

On maturity, there is no tax on withdrawal as interest was taxable during the tenure as per your income tax slab.

For managing retirement needs, the SCSS is a worthwhile tax-saving investment avenue.

There exists a plethora of tax-saving investment avenues, but it is pivotal that you make the right choice considering your risk appetite, investment objective, the goals you are addressing and needs rather than making an ad hoc choice.

By doing that, you'll not be just investing but also engaging in effective tax planning. So, approach tax-saving avenues sensibly. And finally, keep in mind that a penny legitimately saved from tax is a penny earned.

Happy tax planning and investing!

Disclaimer: The views expressed in this article are solely those of the author and do not necessarily reflect the opinion of NDTV Profit or its affiliates. Readers are advised to conduct their own research or consult a qualified professional before making any investment or business decisions. NDTV Profit does not guarantee the accuracy, completeness, or reliability of the information presented in this article.

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