Mr. and Mrs. Sharma found themselves on an important path in their financial journey. With their daughter happily married, they realised the importance of securing their golden years through a well-thought-out retirement plan. The Sharmas decided to begin a stepwise approach to retirement planning, focusing on the maximum deduction under 80C benefits available.
As they sipped on their beverage, Mr Sharma initiated the conversation, “We have done well for ourselves, but it is time to think about our future, especially with the new responsibilities after our daughter’s wedding.”
Mrs Sharma nodded in agreement, “You’re right. Let’s start by understanding how we can maximise our retirement savings while taking advantage of the 80C benefits.”
Here are approaches the Sharmas considered for their retirement planning in India with 80C benefits –
Public provident fund (PPF)
Mrs Sharma, seeking a balance between wealth accumulation and tax savings, opened a PPF account. PPF, with its attractive interest rates and tax-free returns, became a cornerstone of their diversified portfolio. Mrs. Sharma not only ensured financial security for her future but also enjoyed the added benefit of tax exemption on PPF contributions.
Employee provident fund (EPF)
Mr. Sharma, recognising the stability and tax efficiency of EPF, decided to maximise his contributions. EPF not only serves as a robust retirement savings vehicle but also offers tax benefits on both the contributions and the interest earned. By diligently contributing to EPF, Mr. Sharma secured a reliable foundation for his retirement corpus.
National pension scheme (NPS)
Both Mr and Mrs Sharma explored the NPS, a voluntary retirement savings scheme with a long-term perspective. Beyond the advantage of disciplined savings, they appreciated the additional tax benefits associated with NPS contributions. The couple saw NPS as a strategic tool to plan for their retirement while optimising tax efficiency.
5-year fixed deposit (FD)
To balance risk and liquidity, the Sharmas considered investing in tax-saving fixed deposits for a fixed tenure. This approach ensured a steady stream of income, and the interest earned on these fixed deposits became eligible for tax benefits under Section 80C.
Equity-linked saving schemes (ELSS)
Understanding the potential for high returns in the equity market, the Sharmas diversified their portfolio with ELSS. This move not only aimed at wealth creation but also took advantage of the tax benefits offered under Section 80C. ELSS provided them with the opportunity to harness the growth potential of equities while enjoying tax advantages.
Sukanya samriddhi yojana (SSY)
Mr. Sharma, thinking ahead for his granddaughter’s future, explored SSY. By investing in this scheme, he not only secured her education but also enjoyed the dual benefits of wealth creation and tax savings. SSY emerged as a thoughtful addition to their multi-faceted retirement plan.
Home loan repayment
With an outstanding home loan, Mr Sharma realised that the principal repayment was an untapped avenue for 80C benefits. As they diligently repaid the principal component of their home loan, they simultaneously reduced their debt burden and availed tax advantages, making their home loan repayment a strategic part of their retirement plan.
Life insurance premiums
The Sharmas recognised the importance of protection and wealth creation through life insurance. Investing in life insurance policies not only provided financial security but also qualified them for deductions under Section 80C. This ensured that their insurance decisions were aligned with their overall retirement planning in India.
National savings certificate (NSC)
The Sharmas incorporated NSC into their fixed-income strategy, attracted by the guaranteed returns and tax benefits it offered. NSC, with its fixed interest rate and government backing, became a reliable source of income for them while contributing to their overall tax planning.
As responsible grandparents, the Sharmas claimed deductions on tuition fees paid for their granddaughter’s education. This not only supported their grandchild’s academic journey but also leveraged the 80C benefits available for education-related expenses.
Senior citizens savings scheme (SCSS): Being a senior citizen, Mr. Sharma explored SCSS for its dual benefits of regular income and tax savings. The scheme provided them with a structured avenue to park their savings, ensuring financial stability during their retirement years.
Exploring long-term investment options, the Sharmas considered government-approved infrastructure bonds. These bonds, designed to fund critical projects, not only offered tax exemptions but also aligned with their goal of contributing to national development while securing their financial future.
Savings account interest
Mr. Sharma, seeking higher returns on savings, moved part of their funds to a high-interest savings account. This move not only optimised their returns but also allowed them to benefit from 80C exemptions on the interest earned, enhancing the overall efficiency of their savings.
Health insurance premiums
Recognising the crucial role of health in retirement, the Sharmas invested in health insurance policies. Beyond safeguarding their well-being, these premiums became eligible for 80C deductions, reinforcing the idea that comprehensive retirement planning extends to healthcare.
Notified pension funds
Considering the importance of a pension income stream, the Sharmas explored notified pension funds. Contributions to these funds not only helped them build a reliable pension corpus but also qualified for tax deductions under Section 80C, making it a prudent choice for retirement planning.
Rajiv Gandhi equity savings scheme (RGESS)
Delving into tax-saving opportunities in the stock market, the Sharmas considered RGESS. This scheme, designed to encourage equity investments, provided them with a tax-efficient way to participate in the stock market while planning for their retirement.
Principal repayment of housing loan
Realising the hidden potential in their home loan, the Sharmas acknowledged that the principal repayment was eligible for 80C benefits. As they continued to pay off their home loan, they simultaneously reduced their tax liability, making homeownership an integral part of their retirement strategy.
Contributions to their granddaughter’s education formed a crucial aspect of the Sharmas’ 80C planning. By factoring in educational expenses, they not only supported their grandchild’s aspirations but also optimised their tax liability.
Long-term fixed deposits
In their quest to diversify fixed-income investments, the Sharmas opted for long-term fixed deposits. These deposits not only provided stability but also came with tax benefits, contributing to the tax-efficient nature of their overall retirement portfolio. The couple enjoyed the peace of mind that comes with a well-diversified and tax-optimised investment strategy.
Stamp duty and registration charges
The joy of buying a new house was complemented by the realisation that stamp duty and registration charges were eligible for deductions under Section 80C. This unexpected benefit added a financial silver lining to their home purchase, aligning with their overall retirement goals.
As the Sharmas implemented these steps, their retirement portfolio flourished, and they revelled in the satisfaction of securing their future. The wrap to their story lies in the realisation that a stepwise approach, combining various 80C benefits, not only ensures financial security but also makes way for a worry-free retirement.