Mutual Funds for Retirement planning give regular income in the form of pension after the individual has contributed on a periodic basis to build a corpus amount over a long period of time. The individual keeps on contributing monthly or yearly or periodically to the mutual fund and starts to receive regular income after the specified age or time period so that even if his or her income stops due to retirement from business or service, he or she continues to receive it from the mutual fund. There are different variety of products that give the convenience of payment in lump sum or in instalments to the investor.
Mutual Funds that have products associated with payment of pension to investors after a specified age or after a specified time period invest the proceeds in either equity, fixed income or a mix of both to give returns to the individual.
There is no entry load associated with investment in mutual funds pertaining to Retirement planning but there is an exit load if the mutual fund is withdrawn before the specified retirement age or the specified time period.
Systematic Investment Plan can be made for payment in installments and Systematic Withdrawal Plan can also be made for the whole invested amount after the promised date.
Investment and Returns
A minimum purchase of Rs.5000 is required to open the mutual fund account, and the maximum deposit does not have any upper limit. The amount can be deposited in lump sum or in instalments every year.
The Return on a mutual fund investment entirely depends on various factors such as prevailing economic conditions, performance of the equity market, fixed income market or both in the relevant proportion. Some mutual fund schemes invest the entire corpus in equity and equity related instruments and some mutual fund schemes invest the entire corpus in fixed income instruments while some mutual funds invest in a decided proportion of equity and fixed income instruments.
|Allocation Range in %|
The following persons are eligible to subscribe to the Mutual Funds in case of Retirement Planning:-
- Adult Resident Indian Individuals, either single or jointly (not exceeding three).
- Non –resident Indians and persons of Indian origin residing abroad, on a full repatriation basis
- Parents / Lawful guardians on behalf of Minors
Withdrawals from Retirement Mutual Fund Account
There is a lock-in period upto the age of 60 years for the individual. After maturity the entire amount can be withdrawn in lump sum or in a systematic manner through the Systematic Withdrawal Plan.
Nomination facility is available in the name of one or more persons.
Mutual Fund Tax Concessions
Annual contributions qualify for tax rebate under Section 80C of income tax. The highest amount that can be deposited is Rs.1,50,000 in a single year, which gets the benefit of tax exemption. So contribution is exempted under 80C, Returns generated are tax exempted and withdrawal is also tax exempted. Return generated is fully exempted from tax without any limits. Annual contributions qualify for tax rebate under section 80c of income tax.