Top 10 Investment Options for Tax Saving that all of us should know

Guest article by – Avijit Krishna, Independent Financial Advisor

A proper financial plan is paramount to grow your wealth and beat ever rising inflation.

Given here under is a list of available tax-saving financial instruments along-with their features, in order to help you properly plan your investments, in order to meet your financial aspirations and goals :-

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1) Public Provident Fund

Details: You get an 8.1 percent tax-free interest on the investment. Lock in period is 15 years and maximum amount allowed, Rs 1.5 lakh per financial year.
How: Open an account at your local post office or nearest branches of State Bank of India or ICICI bank. (ICICI Bank allows online investments)

2) National savings certificate

Details: For a five-year NSC, the return is 8.1 percent. Interest income every year is taxable. But, as the interest is also reinvested, it becomes part of the overall section 80C contribution. Investment limit is Rs 1.5 lakh per financial year for sec 80c.
How: Apply at your local post office.

3) Five-year tax savings fixed deposit

Details: Lock-in period five years. No pre-mature withdrawals are permitted. Rate varies from bank to bank. Interest earned is taxed and you won’t get a loan against the FD.
How: Open an account at any scheduled commercial bank. You can also make online investment via net-banking.

4) Equity-linked savings scheme

Details: This is a mutual fund scheme that gives your money equity exposure and the returns here are stock market-linked. Keep in mind that this comes with a lock-in period of three years. The dividends you earn are tax-free.
How: You can invest through a financial agent or mutual fund house.

5) Traditional Life insurance premiums

Details: Premium amounts you pay for life insurance policy for self or wife and children can be used for tax rebate under sec 80 c of income tax act. There are a lot of types of traditional insurance products. Term life insurance plan works best as small amount can get you a big cover.
Other traditional plans include endowments and money back plans. Traditional plans are low on returns but give tax free incomes.
How: Apply online on insurance company websites or you can go through an insurance agent.

6) Ulips: Life & Pension plans (Non-traditional)

Details: Ulips combine insurance and investments in one plan. Here you can get a deduction up to Rs 1.5 lakh for premiums paid for pension plans under Section 80 CCC. But keep in mind total deduction under Section 80 C and 80 CCC should not exceed Rs 1.5 lakh.
How: Apply online on insurance company websites or you can go through an insurance agent.

7) NPS

NPS qualifies for tax benefits under three different sections of Indian tax laws
• Section 80C up to Rs. 150,000
• Section 80CCD(1) up to Rs 50,000Section
• 80CCD (2) up to 10% of basic salary contributed by the employer.
NPS restricts withdrawals before the age of 60. As per latest regulations subscribers can make withdrawals from the scheme only after 10 years, only 3 times during the entire duration and at no point of time will withdrawals exceed the sum total of contributions made by the subscriber. The contribution made by the employer, on behalf of their employees, will not be counted as subscriber’s contribution. In effect NPS, being a pension scheme, actively discourages withdrawals of any kind. At age 60, minimum 40% of the accumulated corpus has to be used to purchase an annuity. The subscriber can withdraw up to 40% of accumulated corpus tax-free. Rest 20% can be withdrawn lump sum and the amount will be considered taxable. Alternatively, the subscriber can withdraw this 20% over a period of 10 years. The intent is to encourage subscribers to defer their withdrawals

8) Principal repayment of your home loan

Details: Repayment of principal of your home loan gives you a deduction under 80C of up to Rs 1.5 lakh.
Where: Get a statement from your bank mentioning the amount of principal amount you have paid in the financial year.

9) Senior citizen savings scheme (SCSS)

Details: Only open for senior citizens. They offer 8.60 percent as interest. Maximum investment allowed is Rs 15 lakh in a financial year, but only Rs 1.5 lakh will get benefit under Section 80 C.
How: Approach your local post office or ICICI Bank.

10) School/college tuition fees:

Details: You get deduction under Section 80C for tuition fees paid for your children’s full-time education in India. (Both parents can get exemption of fees paid for education of up to two children however no rebate for coaching fees, Building & development fees, transportation expenses etc)
How: Submit your tuition fee receipts.

Hope you find the above-mentioned insights valuable and helpful in your financial planning. So fully utilize upcoming festival holidays in planning your investments and tax planning and thus help avoid last hour rush in the month of March and save you from ending in out of sync financial instruments for your portfolio (More so as you got stuck with them for long term).

WhattePlan!!

Disclaimer: Above article is only for knowledge purpose and does not amount to investment advise under SEBI’s (Investment advisers) Regulations, 2013. Please consult your financial advisor before investing.

 

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