Retirement life should be tension free and luxurious and to spend this kind of life every person need to start an early pension plan.
Retirement is a part of life when people want to spend the rest of life peacefully and without any kind of approaching deadlines and oppressive work pressure. The time of post-retirement is the time to fulfill all kinds of wishes and needs but sometimes it can’t happen for the financial crisis. The regular income generally stops in this time and a retired person has to save something previously to spend the rest of life in comfort. So it is very much important to save a sufficient amount that can be helpful to lead the further life in pleasure and for this some post retirement plans are essential.
Importance of buying a Pension Plan:
A pension plan is like gathering or saving a satisfactory amount as a fund that will keep up the post-retirement life and as the pension plans come with the life insurance coverage it makes a security around the pensioner in case of emergency.
A pension plan not only gives a regular source of income in post-retirement life to help spending life easily but also become a security and offer tax benefits to benefit tax reduction etc. under the Income Tax Act, 1961.
Benefits of buying a Pension Plan
Apart from the following things there are many other benefits also can get from a Pension Plan, they are:
In any kind of pension plan, there is an opportunity to draw back one-third of the principal at the time of maturity which generally known as “Commutation”. The remaining part can be used as a payment of Pension that the plan holder would get as a monthly income after the retirement.
From the beginning of the achievement a pension plan will give a plan holder a pension as an every month settlement.
The assured or collected or total sum can be paid to the nominee if the policy holder dies.
There is a surrender value offered by the pension plans in the time of emergencies after paying minimum surrender charges.
Besides all these benefits, a pension plan can help a policy holder in the case of saving the income tax and there are also many benefits under it, such as:
Tax reduction under Section 80CCC
It is noticeable that a pension plan can offer a tax deduction of up to Rs. 1.5 lakhs within the Section 80CCC of the Income Tax Act, 1961 and this Rs is the total limit on the subtractions under the Section 80C, 80CCC and 80CCD(1). A policy holder can claim an extra tax reduction under this section but it is applicable for a single payer.
Tax Benefit under Section 10 (10A):
The Commutation process can be received from the income tax under section 10 (10A) of the Income Tax Act and the rest of the total pension is paid back to the taxpayer through a regular monthly pension. This received pension will be like as an income and it will be taxable as per the general tax laws.
Tax treatment on Surrendering the Pension Plan:
If the payer can surrender the pension plan before the maturity time, the value of surrender will be added with the income of the holder and have to give a marginal income tax rate. This value can be paid by the insurer is like as a yearly income of receipt and also taxable.
This all benefits will be available for the pension plan holders who can manage their accounts. There are mainly two types of Pension plans based on the need and requirement of an individual person for getting the pension amount.
1. Delayed pension:
This pension scheme that postpones pension payouts till the investor receives it and under this plan, the investor has to pay the premiums in the accumulation and distribution phase and the investor will get regular pension for whole life.
2. Immediate Pension
In this plan, the investor has to invest a huge sum one-time and with it the person will get regular pension for the whole life and this plan is ideal for them who don’t want to wait till the starting of retirement.
Right age of buying a Pension Plan
For getting a good sum of benefit or pension for life time a person should invest from younger age and in the mid of their age they should get the maximum savings in their plan and the rest of the life can be spent easily. Planning for a retirement plan form an early age in the professional life can make the golden days of retirement more healthy and pleasant. Buying a pension plan apart from normal pension also give a tax benefit and tax exemption.