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How to protect your retirement funds from tax erosion?

Invest in schemes that cater to senior citizens & reduce the impact of taxes on your retirement fund

How to protect your retirement funds from tax erosion?

Retirement in itself is a tricky affair. It requires hands-on planning and forecasting. It involves a lot of effort from an investor’s side to analyse the various investment options available and then invest wisely. However, tax is always a dangling sword atop any successful investment strategy. It poses as a major risk as it reduces the amount of your net returns from any investment. However the trick for avoiding this threat is to invest in schemes that cater specifically to senior and retired citizens, like the senior citizen fixed deposit, senior citizen savings schemes investments and FDs. 
 
The roadmap
 
To stay protected from tax erosion, it is wise for an investor to first examine all the investment options that feature tax-free returns. However, many options that are tax-free involve risk, such as mutual funds. It is important for an investor to choose an option with relatively less risk and higher rates of tax-free returns. For instance, a senior citizen fixed deposit allows senior citizens to invest a sum in fixed deposit accounts and earn non-taxable returns over the sum. Here’s an in-depth look at a few viable options: 
  • Senior citizen fixed deposit scheme: This scheme is like any regular fixed deposit. In this option, an investor has to invest a sum into a fixed deposit account. The sum is locked for a period of time and over that period, the investor receives returns. However, specifically for this scheme, the returns received over the deposit are non-taxable, as it is centred around the requirements of senior citizens. Also, only for this fixed deposit, the deposit sum can range from Rs.1 crore and higher. The tenures of such deposits typically range from 7-10 years.  Withdrawing such the deposit prematurely before the tenure ends will however attract penalty. 
  • Mutual fund for retirement: This investment scheme is similar to classic mutual funds however, with a few characteristics modified to suit the retired and the elderly. The main benefit in this case is that the dividends received from these mutual funds are absolutely non-taxable. The lock in period for these schemes ranges from 5-7 years. 
  • Life insurance schemes: This involves signing a binding contract with an insurance agency, where the insurance agency is liable to pay the beneficiary a sum of money given the circumstance of the insured person’s unexpected death. This option offers the insured person’s family financial security after his/her death. 
  • Pension fund: This option is similar to life insurance. Where life insurance only offers money to the beneficiaries in event of the death of the insured person, a pension plan provides money throughout the retired life of the insured. It is ideal for senior citizens who have to pay for grandchildren’s education, or house and living expenses after retirement.
  • Senior Citizen Saving Scheme: For people seeking income after retirement this is the most feasible option. In this scheme, you can invest a sum of up to Rs.15 lakh. The scheme provides fixed interest rates to the investor.  This Senior Citizen Saving Scheme offers security and guarantee of interest and capital pay out at the end of the term. The interest for this scheme is only taxable for the year of accrual and also subject to tax on deposition, however after the accrual year, the returns are tax-free. 

(This story has not been created or edited by Business Standard editorial staff.)

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How to protect your retirement funds from tax erosion?

Invest in schemes that cater to senior citizens & reduce the impact of taxes on your retirement fund

Invest in schemes that cater to senior citizens & reduce the impact of taxes on your retirement fund
Retirement in itself is a tricky affair. It requires hands-on planning and forecasting. It involves a lot of effort from an investor’s side to analyse the various investment options available and then invest wisely. However, tax is always a dangling sword atop any successful investment strategy. It poses as a major risk as it reduces the amount of your net returns from any investment. However the trick for avoiding this threat is to invest in schemes that cater specifically to senior and retired citizens, like the senior citizen fixed deposit, senior citizen savings schemes investments and FDs. 
 
The roadmap
 
To stay protected from tax erosion, it is wise for an investor to first examine all the investment options that feature tax-free returns. However, many options that are tax-free involve risk, such as mutual funds. It is important for an investor to choose an option with relatively less risk and higher rates of tax-free returns. For instance, a senior citizen fixed deposit allows senior citizens to invest a sum in fixed deposit accounts and earn non-taxable returns over the sum. Here’s an in-depth look at a few viable options: 
  • Senior citizen fixed deposit scheme: This scheme is like any regular fixed deposit. In this option, an investor has to invest a sum into a fixed deposit account. The sum is locked for a period of time and over that period, the investor receives returns. However, specifically for this scheme, the returns received over the deposit are non-taxable, as it is centred around the requirements of senior citizens. Also, only for this fixed deposit, the deposit sum can range from Rs.1 crore and higher. The tenures of such deposits typically range from 7-10 years.  Withdrawing such the deposit prematurely before the tenure ends will however attract penalty. 
  • Mutual fund for retirement: This investment scheme is similar to classic mutual funds however, with a few characteristics modified to suit the retired and the elderly. The main benefit in this case is that the dividends received from these mutual funds are absolutely non-taxable. The lock in period for these schemes ranges from 5-7 years. 
  • Life insurance schemes: This involves signing a binding contract with an insurance agency, where the insurance agency is liable to pay the beneficiary a sum of money given the circumstance of the insured person’s unexpected death. This option offers the insured person’s family financial security after his/her death. 
  • Pension fund: This option is similar to life insurance. Where life insurance only offers money to the beneficiaries in event of the death of the insured person, a pension plan provides money throughout the retired life of the insured. It is ideal for senior citizens who have to pay for grandchildren’s education, or house and living expenses after retirement.
  • Senior Citizen Saving Scheme: For people seeking income after retirement this is the most feasible option. In this scheme, you can invest a sum of up to Rs.15 lakh. The scheme provides fixed interest rates to the investor.  This Senior Citizen Saving Scheme offers security and guarantee of interest and capital pay out at the end of the term. The interest for this scheme is only taxable for the year of accrual and also subject to tax on deposition, however after the accrual year, the returns are tax-free. 

(This story has not been created or edited by Business Standard editorial staff.)

image
Business Standard
177 22

How to protect your retirement funds from tax erosion?

Invest in schemes that cater to senior citizens & reduce the impact of taxes on your retirement fund

Retirement in itself is a tricky affair. It requires hands-on planning and forecasting. It involves a lot of effort from an investor’s side to analyse the various investment options available and then invest wisely. However, tax is always a dangling sword atop any successful investment strategy. It poses as a major risk as it reduces the amount of your net returns from any investment. However the trick for avoiding this threat is to invest in schemes that cater specifically to senior and retired citizens, like the senior citizen fixed deposit, senior citizen savings schemes investments and FDs. 
 
The roadmap
 
To stay protected from tax erosion, it is wise for an investor to first examine all the investment options that feature tax-free returns. However, many options that are tax-free involve risk, such as mutual funds. It is important for an investor to choose an option with relatively less risk and higher rates of tax-free returns. For instance, a senior citizen fixed deposit allows senior citizens to invest a sum in fixed deposit accounts and earn non-taxable returns over the sum. Here’s an in-depth look at a few viable options: 
  • Senior citizen fixed deposit scheme: This scheme is like any regular fixed deposit. In this option, an investor has to invest a sum into a fixed deposit account. The sum is locked for a period of time and over that period, the investor receives returns. However, specifically for this scheme, the returns received over the deposit are non-taxable, as it is centred around the requirements of senior citizens. Also, only for this fixed deposit, the deposit sum can range from Rs.1 crore and higher. The tenures of such deposits typically range from 7-10 years.  Withdrawing such the deposit prematurely before the tenure ends will however attract penalty. 
  • Mutual fund for retirement: This investment scheme is similar to classic mutual funds however, with a few characteristics modified to suit the retired and the elderly. The main benefit in this case is that the dividends received from these mutual funds are absolutely non-taxable. The lock in period for these schemes ranges from 5-7 years. 
  • Life insurance schemes: This involves signing a binding contract with an insurance agency, where the insurance agency is liable to pay the beneficiary a sum of money given the circumstance of the insured person’s unexpected death. This option offers the insured person’s family financial security after his/her death. 
  • Pension fund: This option is similar to life insurance. Where life insurance only offers money to the beneficiaries in event of the death of the insured person, a pension plan provides money throughout the retired life of the insured. It is ideal for senior citizens who have to pay for grandchildren’s education, or house and living expenses after retirement.
  • Senior Citizen Saving Scheme: For people seeking income after retirement this is the most feasible option. In this scheme, you can invest a sum of up to Rs.15 lakh. The scheme provides fixed interest rates to the investor.  This Senior Citizen Saving Scheme offers security and guarantee of interest and capital pay out at the end of the term. The interest for this scheme is only taxable for the year of accrual and also subject to tax on deposition, however after the accrual year, the returns are tax-free. 

(This story has not been created or edited by Business Standard editorial staff.)

image
Business Standard
177 22