- Date : 31/01/2023
- Read: 3 mins
Are you facing issues with retirement planning? Don't worry! We are here to help you.
The new year is here, and we recommend that individuals start their retirement planning early. Founder of RSM India, Dr. Suresh Surana, believes most individuals start their retirement planning early to collect enough funds. Most individuals prefer working until they are physically fit and can fulfill their expectations. However, many people also try reducing their retirement age by accumulating enough funds earlier. Average life expectancy is reducing, and work pressure and stress is increasing, leading to individuals retiring early in some cases. It is a usual scenario where individuals have poor retirement planning. We saw interest rate hikes and rising inflation in 2022, and one should have their long-term retirement planning done early.
Seniors can look into many tax planning measures for their retirement planning. Let's see!
Also Read: These are the tax benefits after retirement
Senior Citizens Saving Scheme ('SCSS') as per SCSS Rules, 2019
Individuals who are 60 years or more when they open an account or someone who is 55 but less than 60 and has retired with superannuation, Special VRS, or VRS are allowed to open their account. They can do it with their spouse or individually with a scheduled bank (SCSS) or post office. The 7.4% interest rate is paid quarterly after accrual. You can close the account post five years or extend it for three years. Tax benefits include deduction under section 80C of the IT Act (Income Tax) up to Rs. 1.5 lacs.
Senior citizens are entitled to higher interest deductions on their investment in five years Term Deposits.
Another option for senior citizens is to open a five-year FD account with any scheduled bank to avail of 80C benefits under the IT Act. Banks are currently offering 7 to 8% interest rates. You should note that earned interest up to Rs. 50,000 on term deposits by any Resident Senior Citizen can be deducted under section 80TTB of the Act. Tax benefits are limited to Rs. 1,50,000 even if both accounts are maintained. Investments in fixed-term deposits are better for seniors who want less risk.
Also Read: Retirement planning
Contribute towards the National Pension Scheme (NPS)
The age to join the NPS is 65 years, and individuals between 60-65 years are also allowed to join up to 70 years. They can contribute to the NPS and claim a deduction of up to Rs. 1,50,000. Seniors can get up to Rs. 50,000 in deductions over and above Rs. 1,50,000 if they deposit money in the NPS. These are lucrative tax benefits.
Medical Insurance Policy
Section 80D of the Income Tax Act allows resident seniors to avail of up to Rs. 50,000 deductions for premium payment towards their medical insurance policies. Others can only claim up to Rs. 25,000.
Senior citizens can use these as their retirement planning options. You must also note that seniors above 60 years who do not have a regular source of income will not have to pay advance tax under Section 207 of the Income Tax Act.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.