Call Us

FOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Call us:

1 860 266 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

Dedicated NRI Helpdesk:

+91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST

Call charges apply

FOR NEW POLICY

Want to buy a new policy online?

Call us:

+91 22 6984 9300

Give missed call for a call back:

+91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST


Exclusively for NRIs:

Call us:

+91 11 4473 0240

Monday – Sunday | 9 am – 9 pm IST

Give missed call for a call back:

+91 11 4473 0242

Monday – Sunday | 9 am – 9 pm IST

Language

Back Arrow Icon
Close Button

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

How Can You Protect Your Pension Plan from Taxes?

24-June-2021 |

Pension plans are the driving force for secure and peaceful retirement life. They provide financial assistance to manage daily expenses, short term medical emergencies and other family commitments. However, to make the best out of pension plans, you must invest in a pension plan for a longer duration to accumulate a huge retirement corpus. And, if you have decided to do so, it is equally important to save your pension policy from taxes* to benefit even better. So, let us understand pension plans and save it all from taxes*.

What Are Pension Plans?

Pension plans are financial solutions that provide a regular income after retirement. There are two phases in pension plans: the accumulation and vesting phases. The vesting phase is also referred to as the annuity phase. During the accumulation phase, you will pay an amount regularly for a long period to make the retirement corpus.

At the end of the accumulated phase, you can purchase an annuity plan with the retirement corpus to provide a regular income for the rest of your life in the vesting phase. You can either start receiving the regular income immediately with the immediate annuity plan or defer it for a certain period with the deferred annuity plan.

 

How to Protect Pension Plans From Taxes?

Pension plans qualify for a tax* deduction and exemption benefits under the Income Tax Act, 1961. Here is a detail about it to help you protect yourself from taxes.

Pension plan income tax deduction

Section 80C of the Income Tax Act, 1961, provides a tax* deduction on the taxable income up to ₹ 1,50,000 for various investments made in financial instruments for saving, investment and retirement benefits. It includes investments made in life insurance plans, Public Provident Fund(PPF), Senior Citizen Savings Scheme, National Savings Certificate(NSC), etc. It helps individuals invest in the long term for savings to accomplish money goals for themselves and their families. In addition, the fund accumulated in such a savings plan can also purchase annuity pension plans to receive a regular income throughout life.

For instance, you can purchase the Tata AIA pension plan, Tata AIA Life Insurance Fortune Guarantee Pension (UIN:110N161V02), with a single premium payment. The plan offers a life cover and the choice of annuity options, whether immediate or deferred. You can also allocate a fixed portion of the annuity for health care expenses with the health wallet benefit. Moreover, the plan provides guaranteed1 additions and the choice of riders# for enhanced financial assistance to manage unprecedented situations.

Section 80CCC is a subsection of Section 80C that provides tax* deduction on premium paid for pension plans issued by life insurance providers. However, it is important to note that the total allowable deductions under Section 80C and Section 80CCC are ₹1,50,000.

Apart from the pension plans provided by life insurance companies, the National Pension Scheme(NPS) is a pension plan provided by the government to benefit individuals planning for their retirement. A portion of the fund invested in the NPS goes to securities investment for market-linked returns.

Investments made in the NPS qualify for tax* deduction benefits under Section 80CCD of the Income Tax Act up to ₹50,000. It is over and above the deduction provided under Section 80C. Therefore, the total allowable deduction for pension plans under Section 80C, 80CCC and Section 80CCD will be ₹ 2,00,000.

The Government of India encourages people to invest in such productive pension plans to secure their retirement with regular income. And, so pension plan tax* benefit is a reward to such investors.

 

Pension plan taxes exemption

Pension plans also qualify for tax* exemption benefits. One-third of the retirement corpus accumulated and provided to you for purchasing annuity options get eligible for tax* exemption benefits. The remaining portion will be taxable based on the income tax slab rates applicable to you.

 

How to Plan Your Finances to Save Income Tax* On Pension Plans?


We have seen the basic features of a pension plan and the tax benefits as applicable to them. However, suppose you want your pension plans to be applicable for maximum tax* benefits. In that case, you have to ensure you diversify the investments made in pension plans offered by insurers and NPS.

Based on your current lifestyle and future family commitments, you can derive an estimate of the amount required for your retirement expenses. You should also ensure a fund for accommodating medical expenses if any. Based on this estimate, you can decide on the premium and the policy term. Invest long-term to accumulate a higher fund while paying an affordable premium to be eligible for tax* benefits.

If you feel you are a prominent source of income for your family's survival, then choosing to invest a major proportion of the fund to buy pension plans will help you in the longer term.

 

Conclusion

Financial planning is the secret to happy and peaceful retirement life. Pension plans provide a great advantage helping you accumulate a higher sum for retirement and vesting it later to purchase an annuity for regular income during retirement. The investment made and the returns earned qualifies for a tax* deduction and exemption under the Income Tax Act, 1961. Life insurance annuity plans provide a life cover, rider# benefits, flexible premium payment options and guaranteed1 additions as part of the pension plans. You can choose between the immediate and the deferred annuity plans as well. So make your decisions wisely, save on tax, earn more and secure your retired life!

 

L&C/Advt/2022/Feb/0235

Looking for a financial solution to save tax? Speak to our expert

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

What is Tax Planning?
Read More
How to Apply for PAN Card Online and Offline in India?
Read More
Aadhaar Card for Non Resident Indians (NRIs)
Read More
Income Tax Rebate
Read More
Know Everything about Minimum Alternate Tax (MAT): Meaning, Rates and Calculation
Read More
5 Tax Saving Tata AIA Life Insurance Plans for Young Parents | Tata AIA Blog
Read More
5 Tax Saving Tips for Newly Married Couples
Read More
EPF Form 31 – What It Is, Eligibility, Filing Procedure, and Instructions
Read More
Child Education Allowance
Read More
EPF Form 11
Read More

People Like You Also Read

What is Tax Planning?
Read More
How to Apply for PAN Card Online and Offline in India?
Read More
Aadhaar Card for Non Resident Indians (NRIs)
Read More
Income Tax Rebate
Read More
Know Everything about Minimum Alternate Tax (MAT): Meaning, Rates and Calculation
Read More
5 Tax Saving Tata AIA Life Insurance Plans for Young Parents | Tata AIA Blog
Read More
5 Tax Saving Tips for Newly Married Couples
Read More
EPF Form 31 – What It Is, Eligibility, Filing Procedure, and Instructions
Read More
Child Education Allowance
Read More
EPF Form 11
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance