Budget 2024: From universal retirement account to NPS,10 expectations from FM Nirmala Sitharaman for retirement planning

Budget 2024: Finance Minister Nirmala Sitharaman is set to present the first Budget of the Modi 3.0 Government on 23rd July at 11 a.m. Experts anticipate a transformative agenda for retirement planning in the Union Budget 2024-25. Key proposals include raising the tax deduction limit under Section 80C to ₹2.5 lakh and introducing a dedicated ₹1 lakh sub-limit for retirement-focused instruments such as NPS and ELSS, aiming to enhance retirement savings substantially.

Here are ten expectations from FM Nirmala Sitharaman for retirement planning.

1)Raise deduction limit under Section 80C

Ashish Aggarwal, Director at Acube Ventures, advocates for raising the tax deduction limit under Sec 80C to ₹2.5 lakh from the current ₹1.5 lakh, with a separate ₹1 lakh sub-limit for retirement-focused instruments like NPS and ELSS. He also suggests increasing the additional deduction under Sec 80CCD(1B) for NPS to ₹1 lakh, which would significantly bolster retirement savings.

2)Senior Citizens Savings Boost Scheme

Aggarwal proposes that the government also introduce a 'Senior Citizens Savings Boost Scheme,' which offers an additional 1% interest rate on all fixed deposits for those over 60.

Also Read: Income Tax Budget 2024 Expectations

3)Youth Retirement Benefit

For millennials, Ashish Aggarwal recommends introducing a 'Youth Retirement Benefit' with an additional ₹25,000 deduction for individuals under 35 who invest in long-term retirement products, encouraging early retirement planning.

4)'Retirement Savings Credit

Gaurav Singh Parmar, Associate Director at Fincorpit Consulting, suggests implementing a 'Retirement Savings Credit,' inspired by the US model.

“A novel approach would introduce a new 'Retirement Savings Credit' on the lines of the US, wherein up to ₹10,000 can be provided as a tax credit for low-income persons for contributions toward retirement accounts,” said Gaurav Singh Parmar.

5) NPS

Gaurav Singh Parmar proposes increasing the tax-free withdrawal limit for NPS at maturity from 60% to 80%, aiming to make NPS more attractive to investors.

6) Inflation-indexed bond for retirement savings

He also recommends introducing inflation-indexed bonds for retirement savings, which offer returns benchmarked against consumer price indices and provide stability and growth potential for retirees.

7) Special benefit for Senior citizens

Another suggestion from Gaurav Singh Parmar is to introduce Section 80TTB, which would offer senior citizens tax-free interest income up to ₹1 lakh from retirement-focused savings schemes, potentially increasing pension coverage in India.

8)'Universal Retirement Account'

Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, proposes creating a 'Universal Retirement Account' with a unified tax deduction limit of ₹3 lakh.

“This can make retirement planning more accessible, and it can also increase the average retirement corpus from ₹7.4 lakh to ₹15 lakh in a decade,” said Maurya

9) Tax benefits for women investors

Siddharth Maurya suggests exploring additional tax benefits for women investors in retirement products to address gender disparities in pension savings.

10) 'Retirement Savings Match Program'

Lastly, he introduces the concept of a 'Retirement Savings Match Program,' where the government matches ₹1,000 for every ₹5,000 saved by lower tax bracket individuals in retirement accounts, aiming to boost retirement savings among this demographic.

These proposals aim to enhance retirement planning in India by introducing innovative incentives and broadening access to retirement savings opportunities across different demographics.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.