If someone retires with a Rs 4.5 crore corpus and invests that money in a fixed deposit (FD) at a 7% interest rate, they can expect to earn about Rs 37.33 lakh in interest over a year. Such a high interest income can push them in a 30% income tax slab, and if they have no other income, they might end up paying around Rs 7 lakh in taxes under the new tax regime. So, after taxes, their net income for the year would be roughly Rs 30.33 lakh.
Is there a way you can get better post-tax returns that also increase each year to keep up with inflation? Yes, it can be done! One option to reduce the tax burden is to invest the corpus in a mutual fund and set up a systematic withdrawal plan (SWP) to get a steady income. The great thing about this approach is that you can withdraw both the principal and gains, but you only pay income tax on the gains and not on the principal amount.
