Tax-Saving Strategies for Retirement Planning
Retirement is supposed to be the golden period of your life where you can kick back and finally relax, but to be able to relax peacefully, retirement planning is crucial. Your retirement plan for tax saving should cover some essentials like providing a regular income, covering any major medical expenses, etc.
You should have enough tax saving to cover your living expenses for your entire life, and on top of that, you should consider factors like inflation and taxes, which can easily eat into your retirement funds. Fortunately, there are several schemes in India that can help reduce your tax burden.
In this blog, let’s look at some of the best schemes and tax saving strategies for retirement planning.
Here are some tax-saving strategies for retirement planning.
Tax-saving fixed deposit
Fixed deposits are an Indian retiree’s favorite tax-saving tool, and for good reason. They are safe, convenient, and easy to set up. Indians are very familiar with fixed deposits and trust them for their fixed returns.
Compliance requirements:
Fixed deposits are an Indian retiree’s favorite tax-saving tool, and for good reason. They are safe, convenient, and easy to set up. Indians are very familiar with fixed deposits and trust them for their fixed returns.
You can claim 1.5 lakhs as deductions every fiscal year under Section 80C of the Income Tax Act. The interest earned on this may or may not be taxed, depending on the interest rate. It has an investment period of 5 years, and if the investors try to withdraw their investment before
Senior Citizen Savings Scheme
The Senior Citizen Savings Scheme is a government-backed retirement benefits program that can be availed of by anyone over the age of 60 in a post office or a bank. The tenure for this scheme is 5 years, and under the right conditions, it can be extended to 3 more years after maturity.
The maximum deposit amount is Rs. 30 lakh, and an individual can claim 1.5 lakh rupees per fiscal year under Section 80C of the Income Tax Act. It is possible to close before maturity under certain conditions.
Pradhan Mantri Vaya Vandana Yojana (PMVVY)
PMVVY is a pension scheme offered by LIC that mainly focuses on providing security and guaranteed returns to retirees. Investors in this scheme will receive a regular pension during their policy. The pension payments are made monthly, quarterly, half-yearly, or annually; it is the investor’s choice.
Under Section 80C of income Tax Act, an individual can claim 1.5 lakh rupees per fiscal year. Any person over the age of 60 can invest in this scheme, and it provides a fixed income for 10 years.
The National Pension Scheme
The National Pension Scheme was introduced by the central government to enable everyone to have access to income after retirement in the form of a pension. Individuals are eligible for a tax benefit of about Rs. 1.5 lakh under Section 80 CCE and Section 80 CCD(1).
NPS subscribers can claim an additional deduction of about $50,000 made to NPS under 80CCD (1B). A tax deduction of about 25% is also available on the amount withdrawn by subscribers.
Standard deduction
Pensioners and salaried employees are eligible for a standard deduction of Rs 50,000 per year under the Finance Act of 2018.
Family pensioners are also allowed a deduction of $15,000 under the new tax regime, but you should note that under the new tax regime, other deductions will not be allowed.
Public Provident Fund
A Public Provident Fund, or PPF, is a long-term post-office recurring plan widely popular for its tax benefits and high interest rates. Individuals can reduce their tax by 1.5 lakhs every year by investing in a PPF, according to Section 80c of the Income Tax Act.
The interest earned from PPF at maturity is entirely tax-free, making it a fantastic tax-saving strategy.
Section 80 TTB exemption
Under Section 80 TTB of the Income Tax Act, a senior citizen earning interest from deposits in a bank, post office, or cooperative society is entitled to a deduction of $50,000 a year.
This not only allows you to save tax on your pension, but you can earn interest on it as well.
Section 80D deduction
Investing in a senior citizen health insurance policy will enable a tax benefit under Section 80D of the IT Act. You will be entitled to claim a tax exemption of up to Rs 50,000 per year on the premium paid for availing of the benefits of the health insurance policy.
Resident but not ordinarily resident:
There is a thin line in the taxability of income between Resident Ordinary Resident and Resident Ordinarily Resident; on below-average incomes, RNORs are not required to pay taxes.
Conclusion
After working your entire life, you shouldn’t let taxes disrupt your retirement plans. Use some of these tips to reduce your tax liability.
By making proper use of these tax-saving options, you can save more and spend your retirement comfortably.