Be it a salaried professional or a small business owner, one needs to hang up boots at a certain point of time. While the former generally has a fixed income, the case is different for the latter. However, if you own a small business, here are five retirement planning options which you can consider.

1. Public provident fund (PPF)

PPF can be a prudent retirement option for you. A government-backed scheme, PPF is an EEE instrument. It means the amount invested, interest earned and the maturity amount is exempt from taxation.

You can open a PPF account in any bank or post-office and deposit money as per your cash flow. PPF investments qualify for tax deduction under section 80C of the Income Tax Act, 1961. The lock-in period is 15 years and the rate of interest is decided by the Government every quarter.

2. National Pension Scheme (NPS)

Another retirement vehicle that you can opt for is NPS, which is under the purview of the Central Government and Pension Fund Regulatory and Development Authority (PFRDA). NPS allows two basic investment choices – Active and Lifecycle funds.

In the former, you can select your asset mix, while in the latter the asset mix changes as you grow older. As retirement is a long-term goal, NPS allows complete withdrawal when you attend 60. While 60% of the corpus can be withdrawn as a lump sum, you need to buy annuities with the remaining 40%, which provides a regular stream of income in your post-retirement years.

3. Equity mutual funds

Regular and systematic investments in equity mutual funds can help you build wealth for retirement. Based on your risk appetite, you can choose a fund and invest in it through a systematic investment plan (SIP).

You can opt for aggressive hybrid funds which invest in a mix of equities and debt, with a greater tilt towards equities. With equity exposure, you can build a sizeable retirement corpus by the time you retire.

4. Pension plan

This is another retirement planning option at your disposal. Initially, you need to invest a regular amount towards a plan and when you retire, you get a fixed amount as pension. Also, investing in pension plans qualify for tax deduction under section 80C of the Income Tax Act, 1961.

Also, some pension plans allow withdrawal during the accumulation stage, i.e., the stage when you make investments towards the plan.

5. Senior Citizen Savings Scheme (SCSS)

If you are a business owner above 60, you can opt for SCSS. A Government-backed initiative, you can invest a maximum of Rs. 15 lakhs in the scheme and get a quarterly pay-out. If you have a bank savings account or a post office savings account, you can opt for this scheme.

The Government fixes the rate of interest on a quarterly basis and investment in it qualifies for tax deduction under section 80C of the Income Tax Act, 1961. However, note that the interest received is taxable under section 80TTB.

In conclusion

While choosing any of the above schemes, do figure out your post-retirement expenses and invest accordingly. If necessary, seek help from a certified financial professional.

Click here to visit our Retirement Planning Calculator


The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.

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