Frequently Asked Questions about Retirement Planning
In India, there are various retirement plans, including the Employee Provident Fund (EPF),
Public Provident Fund (PPF), National Pension System (NPS), and Atal Pension Yojana (APY),
among others.
Eligibility criteria vary depending on the specific retirement plan. However, most plans are
open to Indian residents, and some are also available to non-resident Indians (NRIs). For
example, the NPS is open to individuals aged 18 to 65, while the APY is targeted towards the
unorganized sector and has specific age criteria.
Contribution limits vary across retirement plans. For instance, in the EPF, both the employee
and employer contribute 12% of the employee's basic salary plus dearness allowance each
month. In the case of the NPS, individuals can contribute based on their risk appetite and
retirement goals, with tax benefits available under Section 80CCD(1) of the Income Tax Act.
Many retirement plans offer tax benefits. Contributions to schemes like EPF, PPF, and NPS
are eligible for tax deductions under various sections of the Income Tax Act. Additionally,
returns or withdrawals from these plans may also be tax-exempt or tax-deferred, depending
on the specific scheme and prevailing tax regulations.
Withdrawal rules differ for each retirement plan. While some plans like EPF and PPF allow
partial withdrawals for specific purposes such as medical emergencies or education
expenses, others like NPS have stricter withdrawal guidelines. Early withdrawals from
retirement plans may attract penalties or tax implications.
If you change jobs, you typically have the option to transfer your accumulated funds from
your previous employer's retirement plan (such as EPF) to your new employer's plan or to an
individual retirement account. This ensures continuity of savings and benefits.
Retirement plans that involve investments, such as NPS, may be influenced by market
fluctuations. However, many plans offer flexibility in investment choices, allowing individuals
to manage risk according to their preferences. Additionally, some plans like EPF offer
guaranteed returns.
The treatment of retirement plan proceeds in the event of the plan holder's demise varies
based on the plan's terms and conditions. In many cases, the accumulated corpus may be
transferred to the nominee or legal heir, providing financial security to the deceased's
family.
Some retirement plans like EPF and PPF allow members to take loans against their
accumulated balances for specific purposes such as housing, education, or medical
expenses. However, loan availability, terms, and conditions differ across plans.
Retirement plan providers typically offer online portals or mobile apps where members can
access account statements, track contributions, monitor investment performance, and make
changes to their investment allocations. Additionally, periodic statements and updates are
sent to members via email or physical mail.