Unit 7 : Retirement Planning

Retirement planning is necessary for both males and females, regardless of age or marital status. It is important to start planning for retirement as early as possible to ensure financial security in the future. Relying solely on a spouse to take care of retirement is not a wise decision, as circumstances can change and it is important to have individual financial independence. Therefore, Rohini's views are untenable, and she should consider starting retirement planning early to secure her financial future.

The replacement of income method is a method of estimating retirement income. This method involves calculating the amount of income that an individual will need during retirement in order to maintain their current standard of living. It takes into account factors such as current income, expected expenses during retirement, and any additional sources of income such as pensions or social security. By using this method, individuals can determine how much they need to save and invest in order to ensure a comfortable retirement.

If a person receives gratuity and commuted pension, one-third of the commuted amount of pension is tax-free. This means that only a portion of the commuted pension is exempt from taxation, specifically one-third of the total amount received. The remaining two-thirds would be subject to taxation.

The correct answer is "Only 1,2 & 3 are true". This means that out of the options given, only options 1, 2, and 3 are considered to be defined contribution plans. Option 1 refers to an annuity plan available in the market, option 2 refers to the New Pension Scheme introduced in 2004, and option 3 refers to the Provident Fund. Option 4, which is gratuity as per the Payment of Gratuity Act, 1972, is not considered a defined contribution plan. Option 5, which is gratuity not as per the Payment of Gratuity Act, 1972, is also not considered a defined contribution plan.

The correct answer is "Exempt, Exempt, Exempt (EEE)". Under the provisions of the Income Tax Act, 1961, the contributions made to a PPF account are eligible for tax exemption under Section 80C. The accumulated balance in the PPF account is also exempt from tax, including the interest earned. Additionally, the withdrawal from the PPF account after the completion of the lock-in period is also tax exempt. Therefore, all three aspects of the PPF account, namely contribution, accumulation, and withdrawal, are exempt from tax, making it a suitable investment option for Mr. Anthony Gonzalvis.

The Employees Provident Fund & Miscellaneous Provisions Act, 1952 applies to M/s Dyota Solutions Ltd. since 2004 and thereafter because the Act covers companies that have 20 or more employees. In the given years, the company had 20 or more employees starting from 2004, so the Act applies to them from that year onwards.

The correct answer is "Minimum deposit at any time in a year Rs. 500 and Maximum Rs. 1,00,000." This is because the Public Provident Fund (PPF) allows a minimum deposit of Rs. 500 and a maximum deposit of Rs. 1,00,000 in a year. This information is important for Ms. Kolaveri as she wants to open a PPF account with State Bank of India. Additionally, it is mentioned that the provisions of Sec 80-C of the Income Tax Act, 1961 should be considered, but the details of these provisions are not provided in the given question.

The correct answer is "Service rendered by the employee from the date of joining Employees Family Pension Fund till the EPS came into force." This means that "past service" refers to the period of time during which the employee was a member of the Employees Family Pension Fund before the implementation of the Employees Pension Scheme in 1995.

A scheme providing pension benefits as per Income Tax provisions is called a Superannuation Scheme. This scheme is designed to provide retirement benefits to employees by setting aside a portion of their income during their working years. The contributions made to the scheme are tax-deductible, and the accumulated funds are used to provide a regular income to the employee after retirement. This scheme helps individuals secure their financial future and ensure a stable income during their retirement years.

The correct answer is "All Employees earning Salary equal to or less than Rs.6,500 p.m." because the EPF Act covers employees who earn a salary equal to or less than Rs.6,500 per month. This means that all employees who fall within this salary range are required to be covered by the EPF scheme as per the statutory provisions of the act.

Defined Benefit Plans are retirement plans where the employer promises to pay a specified benefit amount to the employee upon retirement. Gratuity, Employees Pension Scheme, Leave Encashment, and VRS (Voluntary Retirement Scheme) are all examples of Defined Benefit Plans. Provident Fund and Annuity Plans available in the market are not considered Defined Benefit Plans. Therefore, the correct answer is "Only 1, 2, 3 & 4 are true."

The EPS (Employee Pension Scheme) contribution is calculated based on the employee's basic salary. In this case, Mr. Ramalinga Raju's basic salary is Rs. 10,000. The employer contributes 8.33% of the basic salary towards the EPS. Therefore, the EPS contribution would be 8.33% of Rs. 10,000, which is equal to Rs. 833.