In a bid to save tax senior citizens often choose the wrong product that do not match with their requirement. Sometimes, distributors and agents of financial products-- in a bid to earn higher commission-- suggest wrong products, such as endowment insurance plans and single premium guaranteed return schemes. Worth mentioning here is that senior citizens looking to save tax should strictly avoid life insurance products as they don't need any insurance at their age as they generally don't have any liability. Their focus should be on regular income and capital protection. Here are two schemes that can help senior citizens save taxes and earn a relatively higher return from their investments.

Senior Citizen Savings Scheme (SCSS)
It is a government-backed scheme designed for the empowerment and financial security of senior citizens. It offers an interest rate of 7.40% per annum, which is higher than the rate offered on any other fixed-income products designed for senior citizens. This account can be opened in an individual capacity or jointly with your spouse. Nomination facility is available before and after opening the account.

One can deposit maximum Rs 15 lakh in this scheme and the minimum amount that can be deposited is Rs 1,000. Investment in this scheme is eligible for tax deduction up to Rs 1.50 lakh per annum under section 80C. Interest earned under SCSS is payable on a quarterly basis. This scheme matures after 5 years from the date of account opening. But here you have the option to extend the maturity of the account by three more years. But this option should be exercised within 1 year of original maturity. 

5-Year Tax-Saver Bank FD
This tax-saver FD along with SCSS are good options for senior citizens to earn guaranteed return for a longer term while saving tax on the amount of investment. Banks typically offer up to 50 basis points higher interest to senior citizens on tax-saver FDs. However, tax-saving FDs cannot be prematurely encashed before completion of at least 5 years from the date of deposit. 

The maximum amount that you can invest in a tax-saver FD is Rs 1.50 lakh in a financial year. Worth mentioning here is that interest rate on tax-saving FD varies from bank to bank. So you are advised to check with multiple banks in order to get the best rate on these FDs.

A retiree has the option to choose either quarterly interest payout option or monthly interest payout option as per his liquidity requirement. 

Worth mentioning here is that interest earned on both the above schemes are taxable, but interest earned on bank deposits up to Rs 50,000 per annum is exempt from income tax as per the provisions of section 80 TTB.