Tax Planning Investment Options or Tax Savings Instruments
& the Expenses that save tax
Income Exempted and Chargeable under the Head "Salaries"
You can Save Tax Upto Rs. 83,945/-*
Choose the Right Tax Saving Options
(1) EPF
Features - Compulsory deduction from salary is a good way to build a retirement fund alsoLiquidity - VERY LOW, partial withdrawal allowed for major goals Taxability - The amount you get on retirement is completely tax free
(2) PPF
Features - Assured Returns for risk averse investors and it is a Risk Free Investment Click to View details of PFF Scheme
Liquidity - LOW; withdrawal allowed after a certain periodTaxability - PPF income is tax free
(3) Sukanya Samriddhi Deposit Account
Features A natural / legal guardian can open a/c on behalf of a girl child in the name of a girl child from the birth of the girl child till she attains the age of ten years - Assured Returns for risk averse investors and it is a Risk Free Investment Click to View details of Scheme
Liquidity - LOW; Up to 50 per cent of the accumulated amount can be withdrawn only after the account holder turns 18 while full withdrawal is possible after she turns 21. periodTaxability - Any payment from the scheme shall not be liable to tax.
Overview - To promote the welfare of Girl Child and behind this initiative is to address the Gender imbalance and create a positive environment in favour of Girl Child.
(4) 5-yr Bank Deposit
Features - Assured Returns for risk averse investors and it is a Risk Free Investment
Liquidity - Lock In Period till maturity Taxability - income is taxable
(5) RGESS (Rajiv Gandhi Equity Savings Scheme)
Please note that This deduction stands withdrawn from FY 17-18 Features - Rebate under section 80CCG for 50% of Investment amount upto a maximum investment of Rs. 50000/- i.e eligible tax deduction is Rs. 25000/- Liquidity - lock in period of 3 years Overview - It is a Long Term Investment
(6) Sr. Citizen's Saving Scheme
Features - Best tax saving option for Sr. citizen Liquidity - LOW; interest paid quarterlyTaxability - Interest Income is taxableOverview - Risk Free Investment
(7) National Pension System
Features - Allows exposure to equity marketsReturns - Completely market linked returnsLiquidity - VERY LOW; No withdrawal before retirementTaxability - Tax free withdrawals after retirementLong Term Investment
(8) Pension Plans Features - Allows equity exposure but with high chargesReturns - 7-10% (NAV market linked ) Liquidity - LOW; partial withdrawals allowedTaxability - Presently Not taxable
(9) ULIPSFeatures - Gives life cover but charges are very highReturns - NAV market linkedLiquidity - MODERATE; partial withdrawals allowedTaxability - Tax free incomeOverview - Good for long term, wait for fresh investments till DTC comes into force
(10) Endowment Money-Back InsuranceFeatures - Do not consider it a good tax saving tool or life coverReturns - 5-6%Liquidity - LOW; but loan against the policy is availableTaxability - Tax-free income For those planning to buy a insurance cover : Don't buy a life insurance plan with a cover of less than 20 times the annual premium. It would not get benefit when new tax laws are passed (as proposed in DTC)
(11) ELSSFeatures - May give high returns among all optionsLiquidity - MODERATE; lock in period of 3 years But in case liquidity is there when you opt for dividend option. Taxability - Tax free incomes Overview - Long Term & start SIP in young age.
The cost is even lower if you go direct plans of these funds
(12) NSC Features - Assured Returns for risk averse investors and it is a Risk Free Investment
Liquidity - Lock In Period till maturity, however loan is available from banks on pledge of instrument as security Taxability - income is taxable
Expenses that Give Tax Benefits
Income Exempted and Chargeable under the Head "Salaries"
(1) Expenses - School FeesDeductions allowed - Tuition Fees of two children Limit - Rs. 1.50 lakh Overview - Both parents can't claim deduction for the same expenses
(2) Expenses - Housing loan interest Deductions allowed - The interest paid on the loan under Sec 24(b) Limit - Rs. 2.00 lakh a year Overview - It brings down the cost of housing loan
(3) Expenses - Housing loan repaymentDeductions allowed - The principal amount of loan repaid during the yearLimit - Rs. 1.50 lakhOverview - For a large amount of EMI, little left for them for tax savings in other options
(4) Features - Medical InsuranceDeductions allowed - Premium for self, parents deductible under Sec 80DLimit - Rs. 15000 for self and familyRs. 25000 for parents and Rs. 30000 in case of parents are Sr. Citizen
(5) Expenses - Education Loan interest paymentDeductions allowed - The interest payment of education loan is deductible from taxable income under Sec 80ELimit - The interest paid is fully deductibleOverview - Earlier the deduction was allowed only to the borrower. Now, parents or legal guardian can claim deductions for the interest paid for upto the eight successive years.It helps lower the cost of the loan.
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