Kotak e-Term Plan
Protect Your family’s financial future with Kotak e-Term Plan.
Kotak Assured Savings Plan
A plan that offer guaranteed returns and financial protection for your family.
Kotak Guaranteed Savings Plan
A plan that offers long term savings and insurance in one premium.
Insurance and investment in one plan with Kotak e-Invest.
Kotak Health Shield
Insurance against medical expenses related to heart, brain, liver and Cancer.
All ready to hang up your boots? On hitting the retirement milestone, you’ll bid farewell to the daily grind and hectic commuting but not your tax liability. Yes, that’s right! The pension received for services rendered post-retirement is taxable as per the Income Tax slab fixed by the Government of India. It’s thus critical to plan the financial security of your golden years very carefully. The trick is to minimise tax by investing the retirement fund prudently in the right pockets. Let’s find out how.
The income tax law provides special benefits to senior citizens (60-80 years) and very senior citizens (above 80 years). They enjoy a higher basic exemption limit. Senior citizens with an annual income of Rs.3 lakhs do not need to pay taxes, whereas, for super senior citizens, the limit is raised to Rs.5 lakh. Also, senior citizens without a business income are not required to pay advance tax as per IT Act.
Investment in pension plans is a good option. There are several schemes available, like a deferred annuity, immediate annuity, and life annuity, among others. An adequate pension plan provides financial security for the future and also comes with insurance coverage. What’s more, it qualifies for tax benefits under Section 80C, 80 CCC, and 80 CCD. However, do know that tax on pension is calculated just like a tax on income or salary. The pensions you receive are added to your income and taxed as per the slab.
Senior citizens can park a fraction of their retirement fund in fixed deposit (FD) schemes. FDs are a reliable investment avenue that can provide retirees with a secure and steady source of income. Not to mention, banks offer seniors a 0.5% higher interest rate. Also, the principal amount deposited in tax saver FDs for 5-year tenure is eligible for tax deduction under Section 80C of the Income Tax Act.
Equity mutual funds (MFs) can also be part of your retirement portfolio. Equities are widely acknowledged as the best performing asset class for wealth creation over the long run. You can diversify further across large-cap and balanced funds with some exposure in monthly income plans (MIPs) that ensure steady income via dividend payouts. Debt funds are also a good choice as they are tax-efficient and provide easy liquidity. The long-term capital gains acquired from debt funds get taxed at 20% after indexation if held for three years or more.
A comprehensive health insurance plan offers dual protection. It not only covers the medical expenses incurred in the event of an illness but also helps save tax. Senior citizens can get a deduction of up to Rs.50,000 in a year under Section 80D for payment of medical insurance premiums. And yes, preventive health check-up expenses to the tune of Rs.5,000 are eligible for tax exemption. Also, as per section 80DDB, a senior citizen can avail tax exemption of up to Rs.1,00,000 against the treatment of specified diseases.
As you can see, there are several ways to save taxes when you start planning or even enter your retirement years. The golden rule is to evaluate your tax liabilities and choose a low-risk plan that offers good returns for enjoying a comfortable life after retirement.
In this policy, the investment risk in the investment portfolio is borne by the policyholder.