Business Mantra News
Everyone wants to secure his/her life after retirement for which prior financial planning is necessary. To get more tax benefits is one of the agenda of futuristic financial goals. Here are World’s Popular Retirement Tax Benefits Schemes which would help to spend smooth and tension free life style after retirement specially for salaried class:-
- Individual Retirement Account (IRA) USA
An Individual Retirement Account is like a saving account used by individuals to deposit funds for retirement saving. An individual may contribute to IRA that provides tax advantage for retirement savings in the US. These contributions are tax deductible and all earnings and transactions made in IRA have no tax impact, however, withdrawal of funds at retirement is taxable.
- Health Savings Account (HSA) USA
A Health Saving Account is a medical savings account which enables you to get tax deductions by contributing money in health savings. Funds contributed in HSA can be used for qualified medical expenses which are free from federal tax. In this plan, the money is deposited either by an individual or through the employer. If money is withdrawn for non medical expenses then it would be treated a withdrawal under Individual Retirement Account (IRA). They are tax deductible if withdrawn after retirement and stipulates penalty if withdrawn earlier for any purpose other than medical expenses.
- 401 K or Defined Contribution Plan (USA)
A Defined Contribution Plan is a retirement plan in which employers sponsor for their employees, a certain amount of money is kept aside every year by the employer for the benefits of their employees after retirement. The employees and sometimes the employers both make contributions in this plan. In Defined Contribution Plan, the contributions are tax deductible but withdrawals are generally taxable. However, withdrawals can be tax free in special circumstances.
This plan contains some restrictions that decide when and how an employee can his/her their money with or without penalty.
- Social Security Plan of Australia
This plan provides “Superannuation Guarantee” in which the both the employers and employees must contributes in retirement plans. The employees contributes 9% of their salaries every year to receive age pension. To get age pension, the individual must be of 65 years, Australian resident for 10 years & should meet income & asset criteria as prescribed to get benefited under this scheme. The receipts of age pension are free from tax in Australia.
- National Insurance Contributions (NIC) UK
In NIC, contributions or money is paid by both the employers and employees on earnings through the Pay As You Earn (PAYE) system. It is a type of contributory Scheme in which employers give some benefits in kind to employees/participants of NIC in case of death, illness, unemployment and disability. In NICs, contributions are tax deductibles and withdrawals are made on payment of tax.
In India, the retirement benefits are put under the head of (Exemption-Exemption-Tax) EET, which means that contribution in Pension Schemes are tax free, some of payments of funds after retirement like GPF etc. are free from tax but ultimately withdrawals of retirement saving funds are usually taxable in India.
India can also introduce the likewise plans for their salaried class. It is suggested to the Indian Government to bring plans in upcoming budget 2018-19 to make the withdrawals of retirement contributions on maturity totally free from tax.