ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -A 401(k) is a feature of a qualified profit-sharing plan that allows employees to contribute a portion of their wages to individual accounts. Elective salary deferrals are excluded from the employee’s taxable income (except for designated Roth deferrals). Employers can contribute to employees’ accounts.

Detailed explanation-2: -401(k) Plan is a defined contribution plan where an employee can make contributions from his or her paycheck either before or after-tax, depending on the options offered in the plan. The contributions go into a 401(k) account, with the employee often choosing the investments based on options provided under the plan.

Detailed explanation-3: -A 401(k) is an employer-sponsored retirement plan, sometimes called a defined contribution plan (in contrast to a defined benefit pension plan). It allows employees to make pre-tax contributions to the plan, up to a specified amount each year.

Detailed explanation-4: -401(k) in India is a “qualified” retirement plan; the IRS provides it with specific tax benefits, the most significant of which is the exclusion from paying taxes on the returns from your initial investments. You will only be subject to taxation once you retire when you take money out.