How Retirement Plans from Tata AIA Life Insurance Help You Save on Taxes?
Retirement is the golden period of your life. It is the best time to explore the world, spend time with your family, and engage in a hobby of your choice. And, a retirement plan is a necessity to ensure you live a happy and peaceful life. Therefore, investing in a retirement plan is important and should start from a very young age. It will assure a huge retirement corpus while saving on taxes* simultaneously! We at Tata AIA provide varied retirement solutions that provide tax benefits and various other flexible features. So, here is a detail about it all.
What is a Retirement Pension Plan?
A retirement plan has two phases: accumulation and annuity. During the accumulation phase, you will pay a regular premium to accumulate the retirement corpus. On maturity, you will receive a portion of the accumulated corpus while the rest can be invested to purchase an annuity. The annuity plan will provide regular income for your retirement life. It can be started immediately or deferred to a later date.
Retirement Plans from Tata AIA Life Insurance
Before we realize the tax benefits, it is important to get introduced to Tata AIA pension plans.
Tata AIA Life Insurance Fortune Guarantee Pension Plan (UIN:110N161V02) - Offers the choice of annuity options between the immediate and the deferred annuities, life cover, guaranteed1 additions, options to choose the riders#, and a loan against the policy. There is also the option to use a portion of the annuity as a health balance for medical expenses.
Tata AIA Life Insurance Smart Annuity Plan (110N150V05) - Provides guaranteed1 whole life annuity with one-time premium payment. You have the flexibility to choose between the annuity options and the payout modes. There is also the option to increase the benefits with the top-up option based on rising family needs.
Tata AIA Life Insurance Saral Pension Plan (110N157V01) - Offers guaranteed1 whole life annuity, option to choose single or the joint-life annuity based on the annuity and payout mode. You can also avail of a loan on the policy during an emergency.
Tata AIA Life Insurance Guaranteed Monthly Income Plan (110N147V02) - Provides guaranteed1 returns as a regular monthly income up to 288 months. There is flexibility in the mode of premium payment and the option to choose additional riders#, such as waiver of premium on the total and permanent disability of the policyholder.
Let us get ahead and understand how to save on taxes on these retirement pension policies.
How to Save on Taxes with the Retirement Plan
According to the Income Tax Act, 1961, savings made in a pension plan qualify for a tax deduction and tax exemption benefits.
Section 80C provides a tax deduction benefit on investments in financial products such as life insurance plans, fixed deposits, equity-linked savings schemes, etc. Section 80CCC is a subsection of Section 80C that provides tax deductions on annuity pension plans provided by life insurance companies, exclusively.
Therefore, if you have purchased the Tata AIA Life Insurance Fortune Guarantee Pension Plan (UIN:110N161V02) or the Tata AIA Life Insurance Smart Annuity Plan(110N150V05), the annual premium will qualify for tax deduction under Section 80CCC.
Here are a few pointers for your consideration.
However, the maximum limit for such allowable deductions under Section 80C and Section 80CCC is ₹1,50,000.
The amount spent on investing in the National Pension Scheme qualifies for a deduction of up to ₹50,000 under Section 80CCD. It is over and above the tax deduction benefits available under Section 80C and Section 80CCC and should not be confused with the pension plans from insurance providers.
Tax Exemption of retirement benefits
We have seen that you will receive the payout for purchasing the annuity plan at the end of the accumulation phase in the pension plan. One-third of such a payout will be completely tax-free, and the remaining amount used for purchasing the annuity is subject to taxation under the Income Tax Act, 1961 based on the tax slabs.
Tax Planning Strategies for Retirement
The key to get tax benefits depends on how you invest. For instance, if you have decided to invest with our Smart Annuity plan, you must start investing at a younger age. It will help you invest for a longer policy term and help you benefit a lot from the allowable tax deductions. You will also accumulate a higher retirement corpus and benefit from the tax exemption on one-third of the withdrawal made at the end of the accumulation phase or on maturity.
Why Are Retirement Plans Considered good for Tax Benefits?
Our retirement plans offer comprehensive benefits compared to other financial products. For example, when you invest in our Fortune Guarantee Pension Plan, you get a life cover to secure your family's financial future and guaranteed1 additions that help you plan for future financial commitments precisely. You can calculate the extent of income required during your retirement, considering the inflation rate, and choose the policy term and premium accordingly. In addition, it is a secure way to save your income for future commitments while saving on income tax on retirement benefits.
Furthermore, as the plan provides options to utilize online medical consultations, you can receive expert advice on health conditions.
Our Tata AIA retirement plans help you choose between various flexible features that help you customize the plan for your needs. You can get protection and savings benefits for a regular income after retirement. While offering such benefits, the plan qualifies for a tax deduction and exemption benefits on the premium and withdrawal, which is certainly an added advantage on income tax for a retired person.