Have taxable income after retirement? Know the best tax-efficient investment option for you

People who get regular income through investments should look for ways to increase their income over the years to meet higher monetary needs in order to keep pace with inflation.

There can be two types of income for a person who has retired from the workforce. Government employees covered by the old pension scheme (OPS) receive an inflation-adjusted pension for life that increases with the level of price increases and the revision of salary scales through compensation commissions. Other people can generate regular income by investing their retirement corpus in various investment avenues available to seniors and other investors.

As retired government employees enjoy a guaranteed regular pension for life, they can choose any tax saving option available to save tax because they do not have to worry about derive increased income from their investments to keep pace with inflation.

However, people who get regular income through investments should look for ways to increase their income over the years to meet higher monetary needs in order to keep pace with inflation. Indeed, unlike retired civil servants who receive an inflation-adjusted pension, the return on investments in fixed income instruments for other retirees not only does not increase with the rise in the price level, but s eroded due to the fall in the interest rate. on such investments.

With interest rates below the rate of inflation, capital invested in fixed income instruments gradually loses purchasing power – especially after paying taxes on interest earned – harming the prospect of earning a return. higher of the retirement corpus.

Thus, while making tax-saving investments, these investors should keep in mind the need to increase their retirement corpus in order to improve their earning capacity to fight inflation and maintain their income. quality of life.

Since retired investors mainly rely on fixed income instruments to generate stable income, they should make tax-saving investments so that, in addition to saving taxes, the invested capital increases over time and provides them with tax-efficient returns.

Since tax saving instruments such as Public Provident Fund (PPF), National Savings Scheme (NSC), etc. in the long-term Equity Linked Saving Scheme (ELSS) to ensure the growth of their retirement corpus to generate higher income in the long term to keep pace with inflation to maintain their standard of living.

So while retired government employees receiving an inflation-adjusted pension have the freedom to invest in fixed income tax saving instruments like PPF, NSC, FD, etc. other options, but to take risks and choose equity-focused tax saving instruments like ELSS to ensure that they do not jeopardize their standard of living after failing to cope with the long-term price increases.

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Dorothy H. Lewis