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Salary and retirement tax planning strategies for 2026 explained by Chartered Accountant

Salary & Retirement Tax Planning – Smart Strategies for 2026

Author: CA Shiwali Dagar
Updated for: Financial Year 2025–26 | Assessment Year 2026–27

Why Salary & Retirement Tax Planning Matters More Than Ever

For salaried professionals and retirees, tax planning is not about last‑minute savings, it is about structuring income correctly.

Wrong salary structuring or poor retirement planning can result in:

  • Higher lifetime tax outgo

  • Loss of exemptions and deductions

  • Unexpected tax demands after retirement

This article explains how salary earners and retirees can plan taxes smartly in 2026 with clarity and compliance.

Salary Tax Planning for Salaried Employees

1️⃣ Understand Your Salary Structure

Your CTC breakup plays a major role in tax liability. Proper structuring helps optimise taxes legally.

Key components to review:

  • Basic salary

  • HRA

  • Special allowance

  • Employer PF contribution

  • Perquisites

A poorly structured salary often leads to avoidable tax payment.

2️⃣ HRA vs Home Loan – Which Is Better?

  • HRA exemption benefits tenants

  • Home loan offers deduction on:

    • Principal (Section 80C)

    • Interest (Section 24)

Choosing between HRA and home loan benefits depends on location, salary, and loan size.

3️⃣ Choosing the Right Tax Regime

Salary planning must be aligned with the Old vs New Tax Regime decision.

  • Old regime favours deductions & exemptions

  • New regime favours simplicity

Once salary is structured, regime selection becomes clearer.

Retirement Tax Planning – Before & After Retirement

Retirement income is often one-time or irregular, making tax planning critical.

4️⃣ Taxation of Retirement Benefits

Understanding taxability of retirement receipts avoids future disputes.

BenefitTax Treatment
GratuityFully / partially exempt
Leave EncashmentExempt up to ₹25 lakh (non‑govt)
PF WithdrawalGenerally exempt
PensionTaxable

Correct reporting is essential even if income is exempt.

5️⃣ Leave Encashment Planning

With the ₹25 lakh exemption limit, retirees must:

  • Identify correct exemption

  • Ensure proper disclosure in return

  • Avoid double taxation

This is especially important for PSU and bank employees.

6️⃣ Senior Citizen Tax Benefits

Senior citizens enjoy special benefits:

  • Higher basic exemption limit

  • Enhanced deduction under Section 80D

  • Interest income benefits

However, these benefits are often missed due to incorrect filing.

Common Salary & Retirement Tax Mistakes

❌ Blindly choosing new tax regime
❌ Incorrect reporting of exempt income
❌ Ignoring interest income after retirement
❌ Late tax planning at year end

These mistakes often trigger income tax notices.

How CA Shiwali Dagar Helps

✔ Salary structure analysis
✔ Retirement benefit tax computation
✔ Old vs new regime comparison
✔ Tax return filing with future safety
✔ Income tax notice support

Each case is handled with accuracy, foresight, and compliance discipline.

Frequently Asked Questions

Is salary restructuring allowed?

Yes. Employers may restructure salary components within policy limits.

Is leave encashment fully tax free?

No. Exemption limits apply for non‑government employees.

Do retirees need to file returns?

Yes, if income exceeds basic exemption limit.

Contact CA Shiwali Dagar for Salary & Retirement Tax Planning

📍 South Delhi
📞 Phone: 9266032777
🌐 Website: https://cashiwali.com

Final Note

Salary and retirement tax planning is not about shortcuts — it is about getting it right once and for all.

Early planning ensures peace of mind during and after your working years.

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