Tax Saving Investments

By | November 24, 2015


PPF will earn 8.7 per cent, 25 basis points above the average benchmark yield in the previous fiscal year.

Just make sure you invest the minimum Rs 500 in your PPF account in a year, otherwise you will be slapped with a nominal, but irksome, penalty of Rs 50. Though the PPF account matures in 15 years, you can extend it in blocks of five years each. However, this facility is no longer available to HUFs.

If you need money, you can withdraw after the fifth year, but withdrawals cannot exceed 50 per cent of the balance at the end of the fourth year, or the immediate preceding year, whichever is lower. Also, only one withdrawal is allowed in a financial year.

You can also take a loan against the PPF, but it cannot exceed 25 per cent of the balance in the preceding year. The loan is charged at 2 per cent till 36 months, and 6 per cent for longer tenures. Till a loan is repaid, you can’t take more.

Tip : Invest before the 5th of the month if you want your contribution to earn interest for that month as well.

Tax Saving Investments : yes , upto Rs 150000 under overall limit u/s 80C of the Income Tax Act

Equity- linked savings schemes

Equity-linked saving schemes (ELSS) have the shortest lock-in period of three years among all the tax-saving options under Section 80C.There is no guarantee that your investment will generate positive returns after the 3-year lock-in period.Though regular equity mutual funds have a minimum investment of Rs 5,000, you can put in as little as Rs 500 in an ELSS scheme.

Tip ;Don’t invest a lump sum. Split investments in ELSS funds into three SIPs starting from January till March.

When saving for tax, the best instruments are those in the exemptexemptexempt (EEE) tax regime.These get a deduction on investment, and there’s no tax on accrual or withdrawal. These include PPF and ELSS.

If you want to invest in an equity- linked savings scheme (ELSS) and public provident fund (PPF) and have Rs. 20,000 of surplus each month, you can accordingly allocate the proportion of money for each of them.Investments

Experts say those in the lowest tax bracket should split their investment between PPF and ELSS. A majority of the money can go to PPF, say 60- 70 per cent. This is because PPF has a longer lock- in, of 15 years, whereas many break their ELSS investments when creating assets such as buying a house. At an annual interest rate of 8.7 per cent, PPF is one of the best options for retirement planning.

Tax Saving Investments : yes , upto Rs 150000 under overall limit u/s 80C of the Income Tax Act

New Pension Scheme NPS)

Those in the 20 per cent tax bracket  should look at the National Pension Scheme (NPS), if they have exhausted the Section 80C limit. There’s an additional deduction of Rs. 50,000, under Section 80CCD (1B), for contributions to NPS.

The minimum annual contribution is Rs 6,000, which can be invested as a lump sum or in instalments of at least Rs 500. There is no upper limit. The investor also decides the percentage of the corpus that goes into equity, corporate bonds and government securities, the only limitation being the 50 per cent cap on exposure to equity.

Tax Saving Investments : yes


The interest rate has been cut by a marginal 10 basis points to 9.2 per cent. (FY 2013-14)

The interest is paid on 31 March, 30 June, 30 September and 31 December, irrespective of when you start investing.

The only glitch is the Rs 15 lakh investment limit per individual.

Tax Saving Investments : yes


Housing Loan

Housing loan (repayment of Principal ) will help to exhaust the remaining portion of the Rs. 1.5 lakh deductions available under Section 80C.

Those who have bought a house also get a deduction on the interest portion of the home loan under Section 24.If they are staying in it, this is restricted to Rs. 2 lakh. If the flat is let out, the entire interest portion can be claimed as deduction.

Tax Saving Investments : yes

Health Insurance

This year, Finance Minister Arun Jaitley has increased the limit of deduction a person can get for health insurance under Section 80D. Now, one can claim a Rs. 25,000 deduction, compared with Rs. 15,000 earlier for health insurance that covers self, spouse and children. Also, if your parents are senior citizens and you pay for their mediclaim, you can get a deduction of Rs. 30,000, against Rs. 20,000 earlier.

Tax Saving Investments : yes

Tuition Fees  of  Children

Taxpayers can also claim a deduction on tuition fees for children. Husband and wife can separately claim the deductions . This can be claimed for tuition fee paid for fulltime courses at a recognised institution within India.

Tax Saving Investments : yes

Less- known deductions

Those who earn less than Rs. 5 lakh annually can claim a maximum deduction of Rs. 2,000 under Section 87A.

Medical Expenses of parents

In the case of parents over 80 years, who might not be eligible for insurance, medical expenses up to Rs. 30,000 can be claimed. The maximum deduction which can be claimed for both parents is limited to Rs. 30,000.

Tax Saving Investments : yes

Medical Treatment of Specified diseases

Taxpayers can claim additional deductions for parents over 80 years for medical treatment if they are suffering from specified diseases ( such as cancer and neurological diseases).In the current Budget, it’s been raised from Rs. 60,000 to Rs. 80,000.

Tax Saving Investments : yes

 Sukanya Samridhi Scheme

Rate of interest 9.2% Per Annum(w.e.f 1-4-2015),calculated on yearly basis ,Yearly compounded.

Minimum INR. 1000/-and Maximum INR. 1,50,000/- in a financial year. Subsequent deposit in multiple of INR 100/- Deposits can be made in lump-sum No limit on number of deposits either in a month or in a Financial year.

A legal Guardian/Natural Guardian can open account in the name of Girl Child.

• A guardian can open only one account in the name of one girl child and maximum two accounts in the name of two different Girl children.

• Account can be opened up to age of 10 years only from the date of birth. For initial operations of Scheme, one year grace has been given. With the grace, Girl child who is born between 2.12.2003 &1.12.2004 can open account up to1.12.2015.

• If minimum Rs 1000/- is not deposited in a financial year, account will become discontinued and can be revived with a penalty of Rs 50/- per year with minimum amount required for deposit for that year.

• Partial withdrawal, maximum up to 50% of balance standing at the end of the preceding financial year can be taken after Account holder’s attaining age of 18 years.
• Account can be closed after completion of 21 years.

• If account is not closed after maturity, balance will continue to earn interest as specified for the scheme from time to time.

• Normal Premature closer will be allowed after completion of 18 years /provided that girl is married.

Interest earned on the FDR in the name of daughters are also exempt

Tax Saving Investments : yes

Note :-one should avoid using a credit card to pay for instruments such mediclaim that would help in tax deduction. If the person does not pay back on time, the interest charged will be much higher than the tax saved.


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