How Can I Avoid Paying Tax On My Pension?


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Anvin Raj answered
Pension is a certain amount of money that is payable in the form of retirement benefit. Till the employee retires, the money that is pooled in the retirement fund is not taxed. If an employee retires before reaching the retirement age and draws his pension, the payments are taxed at a 10 percent yearly rate apart from the regular income tax. This excise tax is levied because pension funds are supposed to give security only after reaching retirement.

It is suggested that one you retire, you roll over the pension funds into a retirement account. If you keep the money in the retirement account, you will not be taxed. Taxes are an occurrence only if you withdraw money from the account. When the money is in a retirement fund, it does not imply a 'withdraw' and hence will not be taxed.

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