Which Retirement Plan Offers the Best Tax Benefit?

When you invest in a retirement plan, your aim should be to build a handsome corpus for the future and get tax benefits through the investment years. Read on to know about the best retirement plans that offer tax benefits.

Retirement planning is a critical aspect of everyone’s life. Whether you are a salaried employee or a businessperson, you may have to stop working at some point, i.e., you must retire. And, when you retire, you may not have a regular income source. So, how do you manage your expenses in the second innings of your life?

One of the best ways to be financially independent and enjoy the golden years is to start investing in a retirement plan from a young age. Experts suggest that you must invest in a retirement scheme from the day you get your first paycheque.

Today, there are many retirement plans in the market to suit the financial needs of the people. Let us look at some of the best retirement plans that offer tax benefits.


National Pension Scheme is a government-backed retirement plan wherein you voluntarily invest a small amount periodically in your NPS account through the working years. Once you retire, you can draw a regular income through a pension from your accumulated corpus.

Apart from offering you valuable returns and exposure to invest in the money market schemes, NPS is known to be one of the best tax-saving retirement plans. Your contributions to the NPS account are subject to tax benefits up to Rs. 1.5 lakhs in a financial year under Section 80C of the IT Act.

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Also, NPS allows you to withdraw up to 40% of the accumulated corpus upon policy maturity or when you attain retirement age. The amount you withdraw is tax-exempt.

· Senior Citizen Savings Scheme

As the name suggests, this retirement scheme is designed to benefit senior citizens (people aged over 60 years). It is a long-term savings-cum-investment plan that provides a regular income to senior citizens.

Apart from helping you be financially independent during old age, it also allows you to get tax benefits. The contribution to the SCSS is eligible for tax benefit under Section 80C. Also, if the nominee or the legal heir withdraws the principal amount after the account holder’s demise, the withdrawal is tax-exempt.

· Term life insurance policy

A term life insurance policy and retirement planning go hand-in-hand. Term life insurance policy makes sure that even as you retire and don’t have an income source, your family’s financial future is secured.

Term insurance is not only an inexpensive life cover, but it pays a lump sum amount to the nominee in the event of your demise during the policy period. Also, you can claim a tax benefit on the premium you pay for the policy under Section 80C up to Rs. 1.5 lakhs.

In the event of your demise, when the nominee receives the death benefits, the amount is fully tax-free.

Final Word

Apart from the retirement plans mentioned above, many other investments allow you to get tax benefits. Do your research well and choose the right scheme that suits your needs and financial goals.

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