How a 'Just Retired' can achieve efficient tax-saving through prudent investing?
Written on Thursday, January 3, 2019
By Mitali Sharma
Senior citizens are privileged with a host of benefits, specially designed to reduce their financial burden - This blog covers the tax-benefits available to Indian Citizens and describes how a 'Just Retired’ can achieve efficient tax-saving through prudent investing.
Low Tax Liability or Better Tax-benefit
First and foremost, senior citizens get good tax benefits as the tax laws are very relaxed for them. Listed below are the tax benefits offered to them.
Senior citizens in the age group of 60 to 80 years are not liable to pay any income tax for an annual income up to Rs. 3 lakh.
The super senior citizens who are 80 years or more need not pay any tax for annual earning up to Rs 5 lakh.
Under Section 80D of Income Tax Act 1961, they get tax deductions for Health insurance premium of up to Rs 30,000.
Even under Section 80D of Income Tax Act 1961, senior citizen, who is suffering from a critical illness, can avail a tax deduction of up to Rs 60,000. In the case of super seniors, this limit is Rs 80,000.
Tax-benefit illustration for senior citizens:
For many of you perhaps this is the first year of tax-saving after retirement. The tax-saving parameters are different for retired persons, and post-retirement or a ‘Just Retired’ person. Here is an illustration of how a 'Just Retired’ can achieve efficient tax-saving through prudent investing.
Mr. Ramesh Kumar retired at the age of 60 years as a librarian on 1st April 2018. He received total retirement benefits amounting to Rs. 35.5 lacs, including Provident Fund, Gratuity, Leave encashment etc. Mr. Kumar is entitled to a life-long monthly pension of Rs.30,000/-. Also, he has a PPF Account where the accumulated balance is Rs. 8 lakh. Besides, 15 years ago he bought a medi-claim plan covering himself, his wife and he is regularly paying a health insurance premium of Rs.20,000/- per annum.
Just after retirement, Mr Kumar decides to invest his retirement benefits of Rs.35.5 lacs as per details given below:
The tax liability of Mr. Ramesh Kumar for Financial Year April 2018 to 31st March 2019 will be computed as under:
Thus, Mr. Kumar has to pay a total tax of Rs. NIL only on his Total Income of Rs. 6,67,350/- with the help of efficient tax saving.