You work hard all your life to save enough to enjoy the same perks you do now, even after retirement. However, the income you receive from your pension can also be taxed, putting a spoke in the wheels of your post-retirement plans. As a result, you may end up getting a lot less in pension than what you planned for. Here are a few ways to reduce this burden and continue the same quality of life you are used to enjoying even after you retire.
1. Standard deduction
Under the Finance Act, 2018, both pensioners and salaried individuals can now claim a concession of Rs. 40,000 in a year on their salary or pension income instead of the standard deduction. Before introducing standard deduction, salaried individuals were eligible for medical reimbursement of up to Rs. 15,000 a year and a transport allowance of up to Rs. 19,200 every year. So, unlike earlier when you had no special way of reducing your total yearly pension income, now you can do so using the standard deduction and immediately ease your tax burden.
2. Deduction using Section 80C
Under Section 80C of the Income Tax Act, you are eligible for a deduction of up to Rs. 1.5 lakh every year on specific expenses and investments such as the Senior Citizens Saving Scheme (SCSS), National Savings Certificates, Public Provident Fund, government bonds and many more. So, reduce your tax burden by choosing the right investment avenues every financial year.
3. Deduction using Section 80TTB
The interest income on your savings deposits held with a bank, cooperative society, or the post office allows you to claim a deduction of up to Rs. 50,000 every year under section 80TTB of the Income Tax Act. So, you can choose to park a part of your monthly pension income in these savings accounts and allow it to earn interest all through the year for the exemption claim.
4. Deduction using Section 80DDB
Section 80DDB of the Income Tax Act allows senior citizens to claim a deduction of up to Rs. 1 lakh basis the spending you undertake to take care of a dependent suffering from specific diseases. Here, the dependent can be your children, parents, spouse, or siblings, and they can be seeking treatment for diseases such as AIDS, neurological disability, cancer, renal failure, etc.
5. Deduction using Section 80D
If you invest in a senior citizen health insurance plan, Section 80D of the Income Tax Act allows you to claim a deduction for it. Here, you can claim a deduction of up to Rs. 50,000 in a year on the premium you pay to avail of the health insurance benefits.
After putting in years of hard work, you don’t need to pay any more dues than those necessary. The suggestions made above will go a long way in ensuring you live a stress-free life after retirement.
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