For some, Financial Planning, Retirement Planning, and Tax planning are the same tax, but these concepts are not similar. But one cannot be done without the other. Let’s discuss in this article the idea of retirement planning in detail.

I. Retirement Planning

Retirement planning refers to managing finances through ongoing programs such as NPS, long-term mutual funds, insurance policies, etc., to make necessary reserves for long-term retirement goals. Good retirement planning helps you to live a free and independent life after the age of retirement.

II. Differences In Financial Planning And Retirement

The primary objective of financial planning is to help you create and manage wealth in various financial instruments to meet long-term financial goals. At the same time, retirement planning aims to have financial independence at the retirement age.

Financial planning or retirement planning is managing wealth in various aspects, such as cash flow management, asset management, etc., and achieving long-term goals.

III. Instrument For Retirement Planning

1. National Pension Scheme (NPS)

National Pension Scheme is the government initiative to provide retirement benefits to all the citizens of India. The scheme encourages investors to invest all through their employment years. They can also claim a tax deduction of up to INR 1.5 lakhs under section 80C and INR 50,000 under section 80CCD(1B).

2. Public Provident Fund (PPF)

Public Provident Fund (PPF) is a long-term investment option regulated by the Finance Ministry that guarantees returns at the interest rate is 7.1% p.a. Also, the investment in PPF qualifies for a tax deduction under section 80C.

3. Employees Provident Fund (EPF)

EPF is maintained and overseen by India’s Employees Provident Fund Organization (EPFO). It is a retirement benefits scheme for salaried employees. Around 12% of the basic salary is invested in this account. This monthly saving can be used when one cannot earn or upon retirement.

4. Atal Pension Yojana (APY)

APY is a deferred pension plan for the unorganised sectors. A person under 18 – 40 years of age with a savings bank account can benefit from this scheme.

5. Bank Deposits & Fixed Deposits (FDs)

These are the safest investment option available in the market. Which guarantees returns from these are fixed and are around 5.5-7.5%. The investment in tax-saving FDs qualifies for a tax deduction under section 80C up to INR 1.5 lakh.

6. Real estate

Investing in real estate is another best option for people to be considered while planning for long-term investments. They are higher volatile and give higher yields throughout other schemes.

The author Sushant Gangurde is a legal analyst @Taxblock India who aims to educate people about various tax laws and financial planning.

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Taxblock, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Individual & Corporate View Full Profile

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