After retirement, invest the money that comes in your hands in the right place and take advantage of government schemes and tax rules.
Pixabay – Every rupee of retirement fund is valuable, so nothing should be wasted in unintentional investments.
How to Protect Your Retirement Corpus from Tax: Mukesh Solanki, who lives in Surat, is going to retire in February-2022 and is expected to get at least Rs 56 lakh as retirement fund. Mukesh bhai is worried about how and where to invest such a huge amount, there are many people like him who are worried about the investment plan of their retirement fund. Investment advisors advise such people to plan investments with tax planning while preserving capital after retirement.
According to Ahmedabad-based leading financial advisor Amishek Upadhyay, the money that comes in your hands after retirement should be invested in the right place and take advantage of various schemes and tax rules of the government.
Upadhyay says, “Retirement fund is extremely valuable as the recipient gets it at the end of his service life and now he has to spend his entire life with this fund. Therefore, every rupee is valuable and nothing should be wasted in a thoughtless and careless investment.”
Invest in debt funds
Tax expert CA Dhaval Limbani suggests that retirees falling under higher tax brackets can consider investing a portion of their corpus in debt mutual funds which are quite tax efficient. In the current scenario, 7.5% returns can be expected from such schemes. If the investment is for at least three years and you earn some money by redemption of units, then your tax liability will be much less, as you will be entitled to indexation benefits allowed under the IT Act.
Save tax by giving gifts
To reduce the tax liability, you can gift a large sum of money to the son, daughter or parents. These people should be such people who do not come under the tax bracket or do not fall in the higher bracket. No tax is required to be paid on the amount gifted to him and the recipient will either pay very little tax or remain out of the tax net.
The purpose of doing so is to make full use of the maximum deductions allowed under the Income Tax Act to minimize taxable income, Limbani believes.
You can also avail indexation benefit by investing in debt funds. With the help of indexation, one can deduct long-term capital gains which reduce taxable income.
There is a simple formula available to calculate the amount required for post-retirement life, wherein the period of retirement is ‘n’.
Future value of present needs after ‘n’ years from today = present expensesx(1+inflation rate)xn
take care of expenses
You should base the expenditure on the expenditure in addition to the current one. The expenses that are being incurred today will not be there after retirement, such as children’s education, home loan installment etc. Your health expenses may increase after retirement.
Don’t forget the inflation rate
The cost of living is increasing year after year. Today’s monthly household expenditure of Rs 50,000 will increase to about Rs 1.7 lakh (3.5 times) after 25 years at 5 per cent inflation rate.
The effect of inflation will be there even after retirement, but due to lack of income, its effect will be more. For retirement savings, at least 8 percent should be counted on the basis of inflation.
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