By starting early on your retirement savings, you can easily ensure that you have enough finances to maintain a desirable lifestyle in your retirement years. With a comprehensive retirement plan in your pocket, you can also negate the risk of outliving your savings. However, the most important benefit of a retirement saving plan is the tax deductions that you can accrue while investing in the plan.

Under the sections 80CCC and 80CCD (B1) of the Income Tax Act 1961; therefore, you are eligible for availing tax deductions of up to Rs. 1,50,000 in a financial year. That said, tax deductions accrued against retirement savings have two components:

First, you have the investment instruments such as pension plans from reputable insurers and contributions made under Provident Funds such as Public Provident Funds and Employer Provident Funds. These investment options help you create a retirement corpus while availing tax deductions of up to Rs. 1,50,000 on the premiums paid, On the other hand, investments into the National Pension Scheme (NPS) allow you to save an additional Rs. 50.000 under Section 80CCD(1B) . This tax deduction amount is above and over the standard deduction of Rs. 1,50,000 described above.

Moreover, the withdrawals upon maturity to avail partial tax deductions. One-third of the retirement corpus under the pension plan, which is paid out to the retiree (after he or she reaches the retirement age) doesn't incur any tax liability. The remaining amount is distributed as an annuity plan and

The withdrawals, however, are not tax-free. Only one-third of the corpus that is paid out to the retiree (soon after reaching the retirement age) by the pension plan is tax-free. The remaining corpus is distributed as an annuity and is liable to taxation depending on the prevailing tax rate at the time of the retirement.