44. Retirement Plans for Maximum Utilisation of Savings

It is absolutely necessary to have proper utilisation of savings which could be of great help at the time of retirement to all persons whether they are employees or self-employed professionals. This is particularly so because there are no proper retirement benefits available from the government for welfare of the people in post-retirement period. Plans for post-retirement utilisation of savings would differ from person to person as they would depend upon the person’s income, the needs of the person and members of his family, their age, their aspirations, the time available for making investment, the family commitments in preand post-retirement period, etc. However, one strong advice which I can give is not to indulge in risky and speculative ventures as regards utilization of savings for retirement plans. The focus of utilization of savings should be such that it should enable one to save income tax on the one hand and should enable the person to have good deal of money under his control at the time of retirement on the other. With this view, I am giving a few important tips as retirement plans for maximum utilisation of savings and for actual implementation as per the circumstances of the person concerned.

Have an HUF Income Tax File


Many employees, who are Hindus (including Jams and Sikhs), do not have a separate file for the HUF. However, it is possible even without any ancestral property for a Hindu to have a separate status of Hindu Undivided Family (HUF) and get separate exemption of ` 2,50,000 for the Hindu Undivided Family for the income to be earned during the financial year 2017-18 relevant to the assessment year 2018—2019. Besides, a separate deduction up to ` 1,00,000 in respect of investments can be made through the HUF. For this purpose, what one needs is gift from friends and relatives (other than members of the HUF) supplemented by interest-free loans or loans at low rates of interest from relatives and friends. There can be a Hindu Undivided Family with husband and wife only.

 

Net Income Range

Income-Tax Rates

Education Cess

Secondary And Higher Education Cess

Up to Rs. 2,50,000

NIL

NIL

NIL

Rs. 2,50,000 – Rs. 5,00,000

10% of (total income minus Rs. 2,50,000) [*]

2% of income-tax

1% of income-tax

Rs. 5,00,000 – Rs. 10,00,000

Rs. 25,000 + 20% of (total income minus Rs. 5,00,000)

2% of income-tax

1% of income-tax

Above Rs. 10,00,000

Rs. 1,25,000 + 30% of (total income minus Rs. 10,00,000

2% of income-tax

1% of income-tax

 

Surcharge : Surcharge is levied @ 15% on the amount of income-tax where net income exceeds Rs. 1 crore. In a case where surcharge is levied, EC of 2% and SHEC of 1% will be levied on the amount of income-tax plus surcharge.

 

However, marginal relief is available from surcharge in such a manner that in the case of a person having a net income of exceeding Rs. 1 crore, the amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

 

AMT : In the case of a non-corporate taxpayer to whom the provisions of Alternate Minimum Tax (AMT) applies, tax payable cannot be less than 18.5% (+SC+EC+SHEC) of "adjusted total income" as per section 115JC. For provisions relating to AMT refer tutorial on “MAT/AMT” in tutorial section.

 


Trust for the Children’s Needs


To provide for higher education and marriage of son or daughter, a person requires money at the relevant time. For this purpose, it is necessary to have a plan to keep savings duly invested under a trust for the marriage or education of son or daughter. There can be a hundred per cent specific beneficiary trust and it can be created by the investor himself or through his close friend or relative. Such a trust deed should provide for the accumulation of the income of the trust during the minority of the child so that the money is available for being spent on the education, etc. of the child when he is major. During the minority of the child, the income of the minor child under the trust would not be added with the income of the father or mother as per the principles laid down by the Supreme Court of India in the case of C.I.T. v M.R. Joshi [1995] 211 ITR 1 (SC).


Planning for a Residential House


Every one should plan to have at least one residential house or a flat. Fortunately, under the Income Tax Act, a deduction up to ` 1,50,000 is avilable in respect of interest on borrowed funds for purchase or construction of a residential house. Thus, one’s own savings coupled with borrowed funds from banks and other financial institutions should enable the person concerned to own a house in due course. Further, even the repayment of the loan is deductible under Section 80C of the I.T. Act. Thus, a good deal of tax saving is possible by planning to utilize savings and borrowed funds. He can also save a good deal of income tax.


A Trust for Personal Deity


If a person believes in some God, he can have a trust for one’s own deity and keep on investing the savings through the trust in safe funds like units of mutual funds, bank fixed deposits, immovable property, etc. This would enable him in course of time to spend on personal deity, bhandhara and other such personal religious functions without being required to spend out of his tax saved money. This would also enable the person to enjoy a separate exemption limit of ` 2,00,000 for one’s personal deity.


Invest in Life Insurance Policy


Every one should have a life insurance policy so that at the time of retirement sufficient money is available to help the person to have the funds for the marriage of daughter or for investment in jewellery or for higher education of children, etc. As far as possible, an endowment policy without profit would be an ideal investment of savings which would enable the person to save income tax within the overall limit of ` 1,00,000 under the different provisions of Section 80C of the I.T. Act.
 

Contributions to Public Provident Fund


It is absolutely necessary for a person to make investment in 15-year public provident fund. The maximum amount that can be invested is ` 1,00,000 which would enable the person to get income tax deduction within the overall limit of ` 1,00,000 under Section 80C. Further, the interest on PPF of 8% per annum or more is completely exempt from income tax under Section 10 of the I.T. Act. Besides, the accumulated amount on the maturity of the PPF is also not liable to any tax at present.


Tax Free Savings


If one has sufficient money to invest in the bonds and market securities, then mutual fund investment would be very good as the return on mutual fund is completely exempt from income tax. Likewise, if some one has good knowledge of the share capital market, then one can invest in good company shares, the dividend from which is also exempt from income tax. Investments can also be made in tax free Infrastructure Bonds.


Drafting of a Will


I would recommend every person particularly above the age of 40 years to have a properly drafted Will through which he can bequeathhis property to the persons as he likes. While drafting such a Will, care should be taken to see that maximum advantage is taken of the benefit of a separate income tax file in the name of the estate of the testator under Section 168 of the Income Tax Act. Similarly, only one discretionary trust can be created through the Will for making provision for marriage, medical expenses, etc. of the members of the family and future children and grand children to be born for spending at the discretion of the executor of the Will. This would also enable the family to have a separate income tax file with separate exemption limit of ` 2,00,000 after the demise of the testator.
Penalties for Cash Credits or Unproved Loans - HOW to Avoid ?  
Sec. 143(3) : Scrutiny Assessments by Income Tax Department
“Penalties” Under Income Tax Act. 1956
How is a Search Operation Conducted by Income Tax Department ?
Surveys for Checking Ostentatious Expenditure
Surveys for Enforcing Compliance with Provisions of TDS
“Summon” U/s 131 of Income Tax Act.
Investigation by Income Tax Department:
Appellate Authorities of Income Tax Department
Power to Call for Information U/s Sec. 133(6) of Income Tax Act.
Specific Surveys U/s 133A(1) of Income Tax Act.
Types Of Income Subject To TDS [Deduction Of Tax At Source]
Pre-Requisite For Claiming Income Tax Refund
Benefits of Filing Income Tax Returnsn
Section-139(9): Defective Tax Return
 
Get Updated ...
Tax Tutorials
E-Payment Of Direct Taxes
Filing Of Return Of Income
Interest for Delay in Filing the Return of Income [Section 234 A]
Interest for default in Payment of Advance Tax [Section 234B]
Provisions Of 'Income-Tax Law' Useful For Non-Residents
MAT (Minimum Alternate Tax)
AMT ( Alternative Minimum Tax)
Tax On Long-Term Capital Gains (LTCG)
Tax On Short-Term Capital Gains (STCG)
Exemption[ Section-54] For Capital Gains Arising On Transfer Of Residential House Property
Tax Treatment Of Gifts Received By An Individual Or HUF
Set Off And Carry Forward Of Loss Under The Income-Tax Act
Interest For Delay In Payment of TDS/TCS And For Non-Payment Of Tax Demanded
Tax Deduction/Collection Account Number (TAN)
How to apply for PAN ?
Refund Of Excess Tax Paid By The Taxpayer (Sections - 237 to 245 )
Presumptive Taxation Scheme of Section 44AD
Presumptive Taxation Scheme of Section 44ADA
Presumptive Taxation Scheme of Section 44AE
Deduction in respect of Life Insurance Premium, PPF, NSC, etc. [Section 80C]
Deduction in respect of Medical Insurance Premium [Section 80D]
Tax Deducted at Source (TDS) from Interest, other than Interest on Securities (Section-194A)
Tax Deducted at Source (TDS) from Interest on Securities (Section 193)
Late Filing Fees And Penalty For Failure To Furnish/Delay In Furnishing The TDS/TCS Statements
LIBRARY @ Tax Management
TAX & INVESTMENT GUIDE FOR "NRI"- Non-Resident Indians !
GUIDE & FAQ @ TAX
GRAPHICAL PRESENTATION @ TAX
TIPS & TRICKS @ TAX
MANAGERIAL & FINANCIAL DECISIONS @ TAX
5 GOLDEN RULES OF TAX PLANNING
FAMILY TAX PLANNING
DEDUCTIONS FROM YOUR INCOME
EXEMPTED INCOMES
HUF - FORMATION, MANAGEMENT & TAX PLANNING
COMPUTATION OF GROSS TOAL INCOME
INCOME TAX @ GLANCE
MULTIPLE KNOWLEDGEBASE ON TAX
51 TIPS ON TAX PLANNING
APPEALS UNDER INCOME TAX
ASSESSMENTS
PENALTIES UNDER IT DEPATMENTS
TAX SAVING SCHEMES
TAX READY RECKONER
TAX RATES
PROSECUTIONS UNDER INCOME TAX DEPARTMENT
TAXATION SYSTEM IN INDIA
CHARITABLE & RELIGIOUS TRUST - TAXATION
PRESCRIBED FORMS WITH with Section / Rules
KNOWLEDGE BASE !
New Topics @ Tax KnowledgeBase...
 
 

Most Popular Topics :

Corporate Tax ( Taxation in Companies)
FAQ on TDS on Salaries
FAQ on Taxable Income
FAQ on Filing of Income Tax Return
Graphical Chat Presentation of Provision of Motor Car / Other Vehicles [Rule 3(2)(A)&(B)]
'Appeals' Under Income Tax Act. 1961.
'Assessments' Under Income Tax Act. 1961.
List of Exempted Incomes (Tax-Free) Under Section-10
Income Under the Head ' Business and Professions' [Section 28 to 44]
Income Under the Head ' Capital Gain'
Income Under the Head ' House Property '[Section- 22 - 25 ]
Income Under the Head "Salary"
[Section 15-17]
Income Tax on 'Partnership Firms'
PENALTIES Under Income Tax Act. 1961.
Tax Saving Schemes for Individual -Instant Guide
New Tax Rates For FY 2017-18 & AY 2018-19
"Exempted Incomes" under Income Tax Act.
Charitable & Religious Trust :Formation, Registration, & Taxation
Hindu Undivided Family [HUF] - Formation, Management and Taxation
 

Most Popular Links :

Clubing of Income Deduction U/s 80C
Allowances Us-17(3) Exemption-Salary
Tax Amendment-2015 Taxable Income
Clubing of Income Tax Deductions
HUF Deduction HUF Investment
Gift by HUF HUF Tax Planning Tips
Tax Saving Schemes Tax Planning Tips
Refund of Tax Fringe Benefit Tax-FBT
Return Filing Assessment / Scrutiny
Notice from I.T. Dept. Incomes Types @ TDS
Exemptions-Tax Returns “Summon” U/s 131
'Black Money' @ I.Tax Big Gifts To Be Taxed
'Appeals' under I.Tax Assessment @ I.Tax
Exempted Incomes Capital Gain
Business & Professions House Property
Salaries @ I.Tax Partnership Firm
'Penalty' under I.Tax Act. Tax Ready Reckoner
Charitable Trust Useful Links @ I.Tax
 
Guide & FAQ on Tax Knowledgebase @ Taxation Income Tax @ Glance HUF - Formation, Planning & Taxation
Charitable & Religious TRUST NRI (Tax Planning,Saving,Investemnt) Budget 2017-2018 GST (FAQ, Law, Act. Rules, Schedule, Enrollment)
FAQs - Income Tax India Tax Tutorials    
______________________________________________________________________________________________________________________________________________________

Disclaimer:
All efforts are made to keep the content of this site correct and up-to-date. But, this site does not make any claim regarding the information provided on its pages as correct and up-to-date. The contents of this site cannot be treated or interpreted as a statement of law. In case, any loss or damage is caused to any person due to his/her treating or interpreting the contents of this site or any part thereof as correct, complete and up-to-date statement of law out of ignorance or otherwise, this site will not be liable in any manner whatsoever for such loss or damage.

The visitors may click here to visit the web site of Income Tax Department for resolving their doubts or for clarifications