How to Minimise Taxes in Retirement Funds?

According to an Aegon Retirement Readiness Index (ARRI) 2019 at 15 different nations, India ranked at the top. As per data sourced from the survey, India had recorded a score of 7.8.

ARRI accounts for awareness regarding retirement and savings tendencies in individuals. It quantifies such awareness on a scale of 1 – 10, with 1 being the lowest and 10 being the highest.

Retirement is a crucial phase for individuals and proper planning towards financial life after it is essential. Particular facets of financial planning after retirement include ensuring regular and sufficient income to meet daily expenses in tandem with inflation and saving taxes on them.

If you are approaching retirement or have already retired from your professional life, you should consider investing in tax-effective financial instruments which would allow you to continue maintaining your finances while saving on taxes.


How to save taxes on retirement funds?

Post-retirement, you receive a substantial amount in the form of gratuity and provident fund. Additionally, you might possess other avenues of income, such as rent. However, these incomes are taxable as per the Income Tax Act, 1961.

To avoid such taxes, consider investing them in different financial instruments – market-linked and fixed income. The list of schemes you should invest in to plan for your post-retirement life are discussed below –

Tax-saving fixed deposits

Investing a 5-year tax-saver fixed deposit attracts income tax exemptions under Section 80C. A medium-term FD will also generate higher returns. However, senior citizen fixed deposits interest rates are marginally higher.

You can invest in a fixed deposit for both short-term and medium-term. In the case of short-term fixed deposits, the minimum lock-in period is 1 year, while any period exceeding that is considered a medium-term FD, which can go up to 5 years.

senior citizen fixed deposits

National Savings Certificate (NSC)

NSC is a savings scheme where you need to lock your capital for a period of 5 years. It is a fixed-income scheme, where you can earn interest yearly. However, such interest is not meted out every year; instead, it is reinvested.

The tax exemption applies to both the initial deposit and the reinvested amount every year up to Rs.1.5 lakh under Section 80C. Regardless, the interest you earn on your 5th year is taxable as per your applicable slab rate.

Senior Citizen Savings Scheme (SCSS)

Senior Citizen Savings Scheme is one of the best investment options for senior citizens. You deposit up to Rs.15 lakh in a Senior Citizen Savings Scheme account. SCSS provides option to create multiple accounts, the monetary value of which should not exceed Rs.15 lakh. SCSS has a lock-in period of 5 years; however, you can make part withdrawals post one year. The deposit amount for this scheme is exempted under Section 80C.

Equity-Linked Savings Scheme (ELSS)

ELSS is a market-linked financial instrument. Henceforth, their growth rates can be considerably higher than that of fixed-income instruments. Nevertheless, these are also subject to market volatility, which makes them risky investment options. The deposit amount in ELSS funds is exempted from income tax of up to Rs.1.5 lakh yearly under Section 80C. The returns earned on it are also tax-free.

ELSS has an investment period of 3 years, after which you can decide to sell it in the stock market to earn capital gains. Such capital gain is not tax-free.

These are the few best saving schemes in India for various risk profiles. You should consider creating a diverse portfolio of such financial instruments to ensure balanced growth and risk. Consider the various senior citizen fixed deposit interest rates before investing in FDs.

Author Bio:


Gaurav khanna is an experienced tech enthusiast, digital marketer and blogger who is well known for his ability to predict market trends. Check out his blog at
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