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5 Tips To Save Taxes From Your Retirement Money

Naina Kapoor 
on 25 October 2018

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All our lives we work to save enough money so that we can have a prosperous retirement and do not have to worry about our old age. Those who are entitled to pension will definitely have something to look forward to and the provident fund money also happens to have been accumulated. Plus there are other savings that you might have accumulated throughout the years. However, investing that money all over again so that you can out it to best use and get the money when it is required the most is also important. Since you will not get a salary anymore, it is advisable to invest the money in monthly income schemes and also in a way so that you can avoid tax deduction under section 80C.

1. Equity or Mutual Funds: Long term capital gains from stocks and equity on mutual funds are not taxed and hence these two options are very good for senior citizens. However, investment in MFs are subject to market fluctuations and so find out about them properly and refrain from investing your entire retirement fund in it at the very beginning. By selling fixed income securities, irrespective of the tax bracket on is in, one can have to pay a 10% tax. Dividends from stock are also tax-free.

2. Balanced Funds: This is one of the best investment schemes and these are mainly equity-oriented hybrid funds which are safer than stocks or equity mutual funds. They invest up to 35% assets in government and corporate bonds. They are also much safer than pure- equity funds and they are also not taxed like long-term capital gains and dividends. One can also get higher returns over the years, in spite of being exposed to low return debt securities.

3. Public Provident Fund: This is one of few options in the mainstream investment scenario that is free from taxation. The money invested here is completed free from any kind of taxes both in the deposition and the maturity stages under Section 80C and Section 10D of the IT Act. One can invest an amount as high as Rs 1 lakh in PPF and after a lock in period of 15 years, one can get ample returns. One can further increase the time limit three times in lots of five years.

4. Tax-Free Bonds: Bonds are long-term fixed income products that have a lock-in of 10 to 15 years. The interest available is free from any kind of taxes but if the bonds are sold on stock exchange where they are traded, then one might have to pay capital gains tax. Hence, it is important one finds out properly about the nature of the bonds one is buying and where they can be sold for maximum gains. Tax free bonds can be bought from banks and this is the best options for first-time buyers.

5. Home Loans: Tax exemptions for home loan are a popular method of saving taxes and this is great for those who are thinking of investing in some kind of property post-retirement. After all, the average middle-class man still thinks of having his own new house after he gets the money from the provident fund. The EMIs that one pays for the home loan are tax exempted under Section 80C of the IT Act and the principal amount is free from taxation as well. Hence, this allows the borrower to save quite a bit of money which can again go towards the repayment of further EMIs.

Author Bio: Author is a noted financial consultant and adviser. As she has been worked with several financial organisation for many years, she has extensive knowledge in this sector. She loves to write on Financial, Investment and wealth management solutions, covering a broad range of topics like loans, insurance and funding.


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