Tax Planning Investment Options or Tax Savings Instruments & the Expenses that save tax--You can Save Tax Upto Rs. 83,945/-* more

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 also

Liquidity - 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 period

Taxability - 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Liquidity - LOW; Up to 50 per cent of the accumulated amount can be withdrawn only after the account holder turns 18 while full withdrawal is possible after she turns 21. period

Taxability - 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Please note that This deduction stands withdrawn from FY 17-18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 quarterly

Taxability - Interest Income is taxable

Overview - Risk Free Investment

(7) National Pension System

Features - Allows exposure to equity marketsReturns - Completely market linked returns

Liquidity - VERY LOW; No withdrawal before retirement

Taxability - 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 allowed

Taxability - Presently Not taxable

(9) ULIPS

Features - Gives life cover but charges are very highReturns - NAV market linked

Liquidity - MODERATE; partial withdrawals allowed

Taxability - Tax free income

Overview - Good for long term, wait for fresh investments till DTC comes into force

(10) Endowment Money-Back Insurance

Features - Do not consider it a good tax saving tool or life coverReturns - 5-6%

Liquidity - LOW; but loan against the policy is available

Taxability - 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) ELSS

Features - May give high returns among all options

Liquidity - 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 Fees

Deductions 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 repayment

Deductions allowed - The principal amount of loan repaid during the year

Limit - Rs. 1.50 lakh

Overview - For a large amount of EMI, little left for them for tax savings in other options

(4) Features - Medical Insurance

Deductions allowed - Premium for self, parents deductible under Sec 80D

Limit - Rs. 15000 for self and family

Rs. 25000 for parents and Rs. 30000 in case of parents are Sr. Citizen

(5) Expenses - Education Loan interest payment

Deductions allowed - The interest payment of education loan is deductible from taxable income under Sec 80E

Limit - The interest paid is fully deductible

Overview - 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.