Retirement and pension plans have several benefits which are helpful in making post-retirement life easy and hassle-free.
Investments made under section 80CCC are considered to be tax-free, up to a limit of Rs. 1.5 lakhs. You must read it thoroughly before buying a retirement plan. This minimizes the chance of any confusion or fraud.
1. Immediate Annuity - The principal amount will not be taxable here since it is considered a deserving return of your investment. The income tax rate will be decided based on your salary. However, after receiving the full principal amount, you will be taxed that.
2. Deferred Annuity - This plan allows you to reap the benefit of tax-free returns during the accumulation period. The money saved in this duration will be sufficient to provide a comfortable post-retirement plan. Hence, the customer gets tax benefits of retirement plan contributions.
With deferred annuity payment to immediate annuity payment, you can choose your payments as per your convenience.
Learn how to build a tax-free pension income for retirement.