Retired? Here’s how to earn tax free income

Retired? Here's how to earn tax free income

Regular income is a necessity for every individual. Whether you are at your first job, settled down in life or have retired, you need a steady flow of money to take care of yourself and those dependent on you. Employed or self-employed individuals have their salary or profits from professional services to tide them by. Retired individuals need to have a sound financial plan so that they will still maintain a regular income. Here are a few tax-free income options for people who have or will retire soon.


Pension receipts are considered regular income and taxed according to the relevant income tax slabs. If regular pension is your only source of income, and your yearly pension is less than Rs 2.5 lakh, then you don’t need to pay any income tax.

Interest on Bonds and Fixed Deposits

The interest earned on bonds and fixed deposits provides individuals with regular income as you can invest in bonds that give regular interest payouts. Fixed deposits also offer monthly, quarterly and annual interest payouts. Senior citizens usually get a higher interest rate. Senior citizens can also invest in schemes like Pradhan Mantri Vay Vandana Yojana for higher interest rates like 8% for ten years and claim tax exemption under Section 80C.

Systematic Withdrawal Plan (SWP) of Mutual Funds

Retired individuals can also opt for a systematic withdrawal plan from the mutual fund. SWP allows you to withdraw a fixed sum of money by selling your mutual fund units at regular intervals. This is a more tax efficient means to earn regular income from mutual funds as the sale attracts capital gains tax. If you decide to withdraw from a non-equity mutual fund, you are expected to pay long-term capital gains tax at the rate of 20.6% after indexation, provided you have held the investments for at least three years. In other cases, the gains are added to your income and taxed at marginal rate of tax.

For assistance with income tax return filing, visit us at All India ITR or download our app from the Play Store or App Store!


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