Budget 2024: Key Expectations From FM Sitharaman To Boost Retirement Planning
From additional tax rebates to promoting group pension plans for MSMEs, here are some key expectations to boost people’s savings and retirement planning.
From additional tax rebates to promoting group pension plans for MSMEs, here are some key expectations to boost people’s savings and retirement planning.
Budget 2024: 4 Demands Government to fulfil to support senior citizens
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Finance Minister Nirmala Sitharaman is set to present the Union Budget on July 23. One of the critical areas of focus is retirement planning, a concern that touches people across age groups and income classes. Asserting that it is significant for the citizenry to get a boost in this budget for retirement planning, Santosh Joseph, founder and managing partner, Germinate Wealth Solutions LLP, says the government must keep a focus on retirement planning mainly for two reasons:
1. Dearth of Retirement Benefits: A huge number of today’s workforce is in the private sector, and they do not have a retirement benefit. Most youngsters seem to avoid the subject, waiting until later in their careers to make this decision.
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“Therefore, an organised plan by the government with tax benefits will be a huge boost to people considering saving for their retirement because today only people think about retirement planning seriously in middle age or maybe after middle age,” Joseph states.
2. Tax Incentives For Retirement: Government-supported plans that come with tax benefits provide stability, thereby ushering people to start saving towards retirement. Joseph says that a new section or tax slab, which is progressive, could help people be aware and start saving and investing for their retirement. “I think we are trying to solve the bigger problem of getting people to start saving for retirement early on, and tax is a great incentive and a great motivator for people to think about it,” he says.
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Read More: Taxpayers Want Increased 80C Limits, Home Loan Exemption From Finance Ministry
Key Expectations For Retirement Planning Are:
Promotion of Group Pension Plans for MSMEs
There has been a buzz across the industry to demand more benefits for the workforce of Micro, Small, and Medium Enterprises (MSMEs) that lack access to formal retirement savings schemes. Introducing incentives for MSMEs to adopt group pension plans for their employees could bridge this gap.
In addition, tax breaks or subsidies for MSMEs that offer such plans would encourage wider participation and ensure financial security for a large segment of the workforce.
Innovative Schemes For Youth Awareness
Starting early not only allows people to build a substantial corpus over time but also benefits from the power of compounding. The government’s role in providing the right incentives and simplifying processes cannot be overstated.
“Some form of government intervention—it could be a plan or a programme—can be very useful. For example, the senior citizens saving scheme is adequately appreciated and well utilised. Likewise, we should consider a retirement benefit that benefits many people, whether working for a salary or even in business,” Joseph adds.
Increased Deduction Limit Under Section 80C
The taxpayers have kept high hopes from the government to raise the tax deduction limit under Sec 80C to Rs 2.5 to 3 lakh from the current Rs 1.5 lakh, with a separate Rs 1 lakh sub-limit for retirement-focused instruments like the National Pension System (NPS) and Equity-Linked Savings Scheme (ELSS). Increasing the additional deduction under Section 80CCD (1B) for NPS to Rs 1 lakh is also a popular ask that could significantly boost retirement savings.
“Raising the Section 80C limit from Rs 1.5 lakh to Rs 2 lakh is long overdue, given rising incomes and inflation. These changes in Budget 2024-25 could make small savings schemes much more appealing, providing better financial security for millions of Indians,” says Gaurav Bhagat, Managing Director, Consortium Gifts.
Anand K Rathi, co-founder of Mira Money, on the other hand, says that an increase in benefit under Section 80C from Rs 1.5 lakh to Rs 2 lakh is unlikely “as it would be counterintuitive given their aim to move away from such provisions.”
Bhagat further advocates that the extra tax rebate limit under Section 80CCD (1B) should go up from Rs 50,000 to Rs 1 lakh. “This would help individuals save more for retirement. Improving the fixed-income options within NPS can also ensure stable and higher returns,” he states.
Universal Retirement Account
While it is premature to think the government would roll out a ‘Universal Retirement Account’, Joseph opines, “We already have a very good system of the universal account number for the PF facility. Likewise, we can extend this benefit in a similar situation to mobilise savings and money for retirement for long-term purposes.”
With strategic tax incentives, simplification of processes, and increased awareness, the government can create an environment that encourages robust retirement planning, ensuring financial security for the ageing population. “India is naturally a savings-led economy and we have a vibrant capital market here. If the government considers a tax benefit and even a program or a policy to boost, encourage, and nudge people for retirement planning, it can be a great step,” Joseph states.
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Both sections 80CCC and 80C of the Income-tax Act, 1961, allow deductions from the annual income, but the aggregate of the deductions cannot exceed Rs 1.5 lakh.
There are various ITR forms that taxpayers can use for different purposes. To avoid mistakes, senior taxpayers should choose the appropriate ITR form for various tax filing purposes.
Are you a senior citizen with an income below the taxable limit? Filing an income tax return (ITR) can offer several benefits; however, sometimes, not filing an ITR can cause trouble, too!
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