With the Budget proposing tax on Employees' Provident Fund and the U-turn by the government that followed, people started looking for several retirement savings options. Whether one invests in EPF, PPF or NPS, at the end of the term he will have to rely on annuity — immediate annuity or deferred annuity. We try to decode the pros and cons of the two.
1. How does one define immediate annuity plan and deferred annuity? An immediate annuity plan is purchased with a lumpsum. People who want to start their retirement payout opt for immediate annuity. It offers guaranteed income that starts almost immediately for either a limited period or till perpetuity. Deferred annuity helps people save for the future and the annuity starts after a certain date. However, an individual can opt to convert deferred annuity into immediate when he ..
2. What should you look for while buying annuity? Annuities help people plan retirement savings. Payout in annuity depends on whether the individual has opted for fixed or variable income. If a 30-year-old is looking for monthly income of Rs 1 lakh per month on retirement at 58, he will have to invest `16,000 per month, assuming 8% return.
3. What are the tax benefits of buying an annuity plan?
Money invested in annuity plan is tax exempt. Also, money invested for annuity is tax exempt. One can withdraw 25-33% at the annuity, and this amount is exempted from tax. However, income on plan is taxed under the income tax rate. In case of senior citizen, tax is not applicable if the income is below the tax slab limit. However, if any senior citizen has taxable income than advance tax provisions will be applicable. ..
