Start you tax planning NOW!
It's best to start your tax planning in the beginning of the year to help you systematically grow your savings coupled with the added benefit of tax saving realized at the end of the financial year.
The most popular tax saving schemes fall under Section 80 C. Under this section, this year too a deduction of up to Rs.1L is allowed from Taxable Income in respect of investments made in some specified schemes. This may change to Rs.3L from next year once the new direct tax code kicks in from April 1, 2011. Meanwhile, let's focus on this year and see how you can makethe best of Section 80C.
Eligible Schemes Under Section 80C for 2010-2011
The Specified Investment Schemes u/s 80C and u/s 80CCC are:
1) Life Insurance Premiums
2) Contributions to Employees Provident Fund
3) Public Provident Fund
4) NSC (National Savings Certificates)
5) Unit Linked Insurance Plan (ULIP)
6) Repayment of Housing Loan (Principal)
7) Equity Linked Savings Scheme (ELSS) of Mutual Funds
8) Tuition Fees including admission fees or college fees paid for full-time
education of any two children of the tax payer.
9) Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI,
REC, PFC, etc.
10) Pension scheme of LIC of India or any other insurance company.
11) Fixed Deposit with Banks having a lock-in period of 5 Years
This article, in 2 parts, will discuss the details of all the above plans.
Life Insurance Premiums
An amount up to Rs.1 lake, that you pay towards your life insurance premiumfor yourself, your spouse or your children can be included in Section 80Cdeduction. An amount up to Rs.1 L, that you pay towards your life insurance premium for yourself, your spouse or your children can be included in Section 80C deduction. Life insurance premium paid for your parents or your in-laws is not eligible for deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy only from Life Insurance Corporation (LIC) even insurance bought from private companies can be considered. All plans like endowment, money-back plans and term plans are eligible for the deduction.
You can also seek exemption from gross income under Section 10 (10) D for any sum received from insurance policy as maturity proceeds. Death benefits are exempt from tax.
Employee Provident Fund (EPF)
The EPF is a scheme intended to help employees from both private and non-pensionable public sectors save a fraction of their salary every month in a saving scheme, to be used in an event that the employee is temporarily or no longer fit to work or at retirement.
A member of the provident fund can withdraw full amount at the credit in the fund on retirement from service after attaining the age of 55 year. Full amount in provident fund can also be withdrawn by the member under the following circumstance:
* A member is retired on account of permanent and total disablement due to bodily or mental infirmity.
* On migration from India for permanent settlement abroad or for taking employment abroad.
* In the case of mass or individual retrenchment.
EPF is automatically deducted from your salary. Both you and your employer contribute to it. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80Cinvestments. You also have the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free. Also,apart from saving tax now, it builds along term, tax-free retirement corpus for you.
The EPF is fully exempted at all stages- investment, growth and withdrawal,but from April 2011 it might be taxed at the time of withdrawal.
Public Provident Fund
Public Provident Fund is a tax saving investment, the interest earned is also tax free. It is a scheme run by the Government of India, and it is also totally safe. The interest paid is 8% compounded annually and the minimum investment is Rs. 500 and the maximum investment is Rs. 70000/-. It is a long-term investment option (minimum 15 years with option to extend it for any number of 5 year periods) as the interest is fully exempted from tax.The PPF is fully exempted at all stages-investment, growth and withdrawal,but from April 2011 it might be taxed at the time of withdrawal.
The unique feature of PPF is that in case of insolvency it will not be attached to the assets of the insolvent. So this is an attractive tax saving tool for business people in fluctuating and highly leveraged businesses.
National Saving Certificate
It is a good medium term investment option. National Savings Certificate(NSC) is a 6-Year small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e.,the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six years.The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction. An advantage of the NSC is that it can be pledged as security against a loan to banks/ Govt. Institutions. The minimum investment starts from Rs. 100/- and there is no maximum limit for the investment.
Unit Linked Insurance Plan
Unit Linked Insurance Plan (ULIP) is life insurance solution that provides for the benefits of risk protection and flexibility in investment. Part of the premium you pay goes towards the sum assured (amount you get in a life insurance policy) and the balance will be invested in whichever investments you desire - equity, debt or a mixture of both.
The investment is denoted as units and is represented by the value that it has attained called as Net Asset Value (NAV). The fund value at any time varies according to the value of the underlying assets at the time. This is similar to mutual funds.
ULIP provides solutions for insurance planning, financial needs, and many types of financial planning including children's marriage planning.
The tax benefit for life insurance plans also extend to the time of maturity and in case of death claim under Section 10(10)D. However for ULIPs the maturity benefit is tax free only if the premium paid per year is less the20% of the life insurance cover. In other words the life cover has to be atleast 5 times the premium. As per the New Direct Tax Code (which will come into force from April 1st 2011) this benefit will be available only if the life cover is 20 times the premium.
Friday, May 28, 2010
Thursday, June 25, 2009
Mutual Funds could be your best option
The stock market is suddenly looking up with sensex breaching the 15,000-mark. Not surprising, so-called market experts are also back in action. Some predict a turnaround may be just around the corner. Others claim that investors can safely bet on stocks if they are prepared to wait for at least two years. And almost everyone is sure of handsome returns from the stock market once again.
However, there is a small problem. Most potential investors don’t have a clue on how to go about investing in the stock market. After all, only a small percentage actually opts for investments in stocks. If you are among the novices waiting to test the waters, here’s the scoop: just hire a brilliant stock market investor.
No, don’t worry. This tie-wearing expert won’t charge you a bomb for fee. You also don’t have to pledge lakhs of rupees to hire his service. All you need is small change. Even an investment of as little as Rs 100 a month would do. Surprised? Don’t be. We are speaking about hiring the service of a mutual fund (MF) manager to take care of your investments in stocks.
Here is how it works. An MF actually collects money from a pool of investors and puts the money in stocks on their behalf for a small fee (1.5-2% annually). An investor has the option of a variety of debt schemes (that invest in fixed income instruments) and/or equity schemes (that go for stocks). The only difference is that unlike in a portfolio management scheme, where one has the option of setting his or her own parameters, here an investor has to choose a scheme with pre-set parameters that will match his investment objective.
According to experts, investing in an MF scheme is a win-win situation for the retail investor as most of them are not well-versed in the working of the stock market. “For most people, the stock market is still an unsolved puzzle. They get scared when the market goes up and they are equally scared when there is continuous slide," says a wealth manager in a bank.
Also since most people don’t have the expertise or time to monitor stocks on a regular basis it is better to give the responsibility of taking the investment decisions to a professional fund manager. This will ensure that emotions don’t dictate the buying and selling of stocks.
Another reason why you should opt for an MF scheme is that it is the most effective way to diversify your portfolio. Sure, one can argue that these days there is a choice of buying a single share of a company and so it is easy to diversify across stocks and sectors.
Experts believe that MFs do a better job of itThere is no point in diversifying if you really don’t have a proper view. A fund manager would be in a better position to take a call on various sectors as he has a large team of research professionals to help him.
The most important aspect of investing via MFs is the convenience. For example, one can start investing with as little as Rs 100 a month in an equity scheme. Also, one can enter and exit a scheme at any time, as most of them (called open-ended schemes) permit that.
Additionally, they also offer tax benefits. For example, if you hold equity schemes for over a year, you qualify for long-term capital gains tax, which, at present, is nil. Always check the reputation of the fund house first. The next should be to review the performance of the scheme at least for three years.
Make sure that the scheme has performed well during the boom as well as bear phase. This would give you a fair idea about the investing skills of the fund manager.
However, there is a small problem. Most potential investors don’t have a clue on how to go about investing in the stock market. After all, only a small percentage actually opts for investments in stocks. If you are among the novices waiting to test the waters, here’s the scoop: just hire a brilliant stock market investor.
No, don’t worry. This tie-wearing expert won’t charge you a bomb for fee. You also don’t have to pledge lakhs of rupees to hire his service. All you need is small change. Even an investment of as little as Rs 100 a month would do. Surprised? Don’t be. We are speaking about hiring the service of a mutual fund (MF) manager to take care of your investments in stocks.
Here is how it works. An MF actually collects money from a pool of investors and puts the money in stocks on their behalf for a small fee (1.5-2% annually). An investor has the option of a variety of debt schemes (that invest in fixed income instruments) and/or equity schemes (that go for stocks). The only difference is that unlike in a portfolio management scheme, where one has the option of setting his or her own parameters, here an investor has to choose a scheme with pre-set parameters that will match his investment objective.
According to experts, investing in an MF scheme is a win-win situation for the retail investor as most of them are not well-versed in the working of the stock market. “For most people, the stock market is still an unsolved puzzle. They get scared when the market goes up and they are equally scared when there is continuous slide," says a wealth manager in a bank.
Also since most people don’t have the expertise or time to monitor stocks on a regular basis it is better to give the responsibility of taking the investment decisions to a professional fund manager. This will ensure that emotions don’t dictate the buying and selling of stocks.
Another reason why you should opt for an MF scheme is that it is the most effective way to diversify your portfolio. Sure, one can argue that these days there is a choice of buying a single share of a company and so it is easy to diversify across stocks and sectors.
Experts believe that MFs do a better job of itThere is no point in diversifying if you really don’t have a proper view. A fund manager would be in a better position to take a call on various sectors as he has a large team of research professionals to help him.
The most important aspect of investing via MFs is the convenience. For example, one can start investing with as little as Rs 100 a month in an equity scheme. Also, one can enter and exit a scheme at any time, as most of them (called open-ended schemes) permit that.
Additionally, they also offer tax benefits. For example, if you hold equity schemes for over a year, you qualify for long-term capital gains tax, which, at present, is nil. Always check the reputation of the fund house first. The next should be to review the performance of the scheme at least for three years.
Make sure that the scheme has performed well during the boom as well as bear phase. This would give you a fair idea about the investing skills of the fund manager.
Post Office Monthly Income Scheme
Only scheme in Post office where monthly interest is payable.
Suitable scheme for senior citizens and for those who need regular monthly income.
Interest rate of 8% per annum payable monthly.
Maximum amount is Rs.4.5 lacs in single account and Rs. 9 lacs in a joint account.
Maturity period is 6 years.
Facility of automatic credit of monthly interest to saving account if accounts
are at the same post office.
Facility of premature closure of account after one year @2% discount.
After three years with 1% deduction
Transferability
Account is transferable from one post office to any Post office in India free of cost.
Nomination facility available.
Income Tax
Rebate under section 80 C not admissible.
Interest income is taxable, but no TDS
Deposits are exempt from Wealth Tax
Suitable scheme for senior citizens and for those who need regular monthly income.
Interest rate of 8% per annum payable monthly.
Maximum amount is Rs.4.5 lacs in single account and Rs. 9 lacs in a joint account.
Maturity period is 6 years.
Facility of automatic credit of monthly interest to saving account if accounts
are at the same post office.
Facility of premature closure of account after one year @2% discount.
After three years with 1% deduction
Transferability
Account is transferable from one post office to any Post office in India free of cost.
Nomination facility available.
Income Tax
Rebate under section 80 C not admissible.
Interest income is taxable, but no TDS
Deposits are exempt from Wealth Tax
Senior Citizen Saving Scheme
Tenure of the scheme - 5 years which can be extended by 3 more years.
Rate of interest - 9 per cent per annum.
Frequency of computing interest - Quarterly.
Taxability - Interest is fully taxable.No income tax / wealth tax rebate is admissible under the scheme. The prevailing income tax provisions shall apply .The tax will be deducted at source
Investment to be in multiples of - Rs. 1000/-
Maximum investment limit - Rs. 15 lakh
Minimum eligible age for investment - 60 years (58 years for those who have retired on superannuation or under a voluntary or special voluntary scheme). The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions
Premature withdrawal facility - Available after one year of holding but with penalty
Transferability feature - Not transferable to others
Tradability - Not tradable
Nomination facility - Nomination facility is available
Modes of holding - Accounts can be held both in single and joint holding modes. Joint holding is allowed but only with spouse
Applicability to NRI, PIO and HUFs - Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.
Transferability - Transfer of account from one deposit office to another in case of change of residence is permitted.
Rate of interest - 9 per cent per annum.
Frequency of computing interest - Quarterly.
Taxability - Interest is fully taxable.No income tax / wealth tax rebate is admissible under the scheme. The prevailing income tax provisions shall apply .The tax will be deducted at source
Investment to be in multiples of - Rs. 1000/-
Maximum investment limit - Rs. 15 lakh
Minimum eligible age for investment - 60 years (58 years for those who have retired on superannuation or under a voluntary or special voluntary scheme). The retired personnel of Defence Services (excluding Civilian Defence Employees) shall be eligible to invest irrespective of the age limits subject to the fulfillment of other specified conditions
Premature withdrawal facility - Available after one year of holding but with penalty
Transferability feature - Not transferable to others
Tradability - Not tradable
Nomination facility - Nomination facility is available
Modes of holding - Accounts can be held both in single and joint holding modes. Joint holding is allowed but only with spouse
Applicability to NRI, PIO and HUFs - Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.
Transferability - Transfer of account from one deposit office to another in case of change of residence is permitted.
Friday, June 12, 2009
Is this the right time to buy an apartment?
What was happening?
Home owners were postponing purchase decisions since most of them were priced out, especially since 2005. In simple words they were not finding a property within their budget because the supply that was coming into the market, especially after 2005, was catering to the high end segment. Interest rates on home loans started rising after hitting a low of around 7.5 % in mid 2004. High interest rates meant you had to pay a higher price for your loan. According to a study when interest rates hit a low, around 39% of an individual’s monthly income used to go towards servicing the EMI, after 2005 this figure shot up to around 54 %.
In 2008 the sector which was already batting high property costs and high interest rates, received a big blow from negative sentiments and insecurity among prospective homebuyers about their future earnings. While the above mentioned reason has forced likely home buyers to postpone purchases, developers too were in a spot. Their major problem was liquidity, regular sources of funds –banks, IPOs and private equity had dried up for them. Sales too had taken a severe hit since Jan 2008.
Come 2009..
Prices have come down from 15-30% all across the country. Moreover the concentration on building small more efficient houses just adds the affordability. Top that with SBI’s lead gesture to bring down home loan rates to 8%(even though it is for one year only ) and government directive to include housing sector in priority sector lending category.
So should I buy now?
Yes, this is a good time to buy. Interest rates have almost bottomed out (only to be further harden by the end of the year which will raise home loan prices too) So take advantage of that builders are offering to clear inventory & a home loan from SBI or other public sector banks and I think you’ve got a good deal.
Should I sell my apartment now?
You should sell if you had invested in that property purely for investment reasons. Realty has stabilized so no more abnormal gains in the next 3 years. Many investors are trying to pull out of their investments. Most are not finding buyers at a price that they think is fair value of their property.
If you had entered the real estate market to make quick money there is no point hanging around any longer. Even if you had invested for the medium term but are facing liquidity pressures, it is better to find a buyer and pull out. However if there is no compelling reason for you to pull out, it is a better idea to stay invested for the medium to long term, preferably more than 5 years. Also remember the returns from real estate are second only to equity.
Once you are sure you want to sell, get a fix on the price. Buyers are very sensitive about the price. Get an idea of the recent sale price in the locality of your property for similar property. Get an idea of how much prices have fallen since Jan 08 and factor in the correction. Be flexible during negotiations process. Keep in mind that your money is locked in the house (which you don’t need and keep in mind that money has opportunity cost!) so liquidate it and use it for investments or paying off liabilities. If your loan is still running and you wish to sell the house, you will have to involve the loan provider in the process.
If you are not flexible about your price expectations prospective buyers who could have bought your property will move away to mid income and low income segments. The best way to market the property is to list it in the many realty portals available like magic bricks.com, makaan.com, 99acres.com.You could contact your local broker but his reach will be limited and commission could be as high as 1 % of the sales price.
What about unfinished construction?
Visit the site regularly to check if construction is still on. If construction is on full swing, do not stop the regular checks. However if construction has stopped on the site then take up the matter with the developer. Take along like minded people who have also invested in the same project. If the developer does not listen to you, approach the local body of developers. Most forward looking bodies will help you... However if the matter does not get resolved at this level either, approach the consumer court. In numerous instances, consumer courts have taken the developers to task for delay in projects.
Whatever happens don’t worry even if the prices are down right now you will still stand to gain if you have invested for the medium to long term, because the present slowdown is, after all, a cyclical phase.
Comments, views and suggestions are most welcome....
Home owners were postponing purchase decisions since most of them were priced out, especially since 2005. In simple words they were not finding a property within their budget because the supply that was coming into the market, especially after 2005, was catering to the high end segment. Interest rates on home loans started rising after hitting a low of around 7.5 % in mid 2004. High interest rates meant you had to pay a higher price for your loan. According to a study when interest rates hit a low, around 39% of an individual’s monthly income used to go towards servicing the EMI, after 2005 this figure shot up to around 54 %.
In 2008 the sector which was already batting high property costs and high interest rates, received a big blow from negative sentiments and insecurity among prospective homebuyers about their future earnings. While the above mentioned reason has forced likely home buyers to postpone purchases, developers too were in a spot. Their major problem was liquidity, regular sources of funds –banks, IPOs and private equity had dried up for them. Sales too had taken a severe hit since Jan 2008.
Come 2009..
Prices have come down from 15-30% all across the country. Moreover the concentration on building small more efficient houses just adds the affordability. Top that with SBI’s lead gesture to bring down home loan rates to 8%(even though it is for one year only ) and government directive to include housing sector in priority sector lending category.
So should I buy now?
Yes, this is a good time to buy. Interest rates have almost bottomed out (only to be further harden by the end of the year which will raise home loan prices too) So take advantage of that builders are offering to clear inventory & a home loan from SBI or other public sector banks and I think you’ve got a good deal.
Should I sell my apartment now?
You should sell if you had invested in that property purely for investment reasons. Realty has stabilized so no more abnormal gains in the next 3 years. Many investors are trying to pull out of their investments. Most are not finding buyers at a price that they think is fair value of their property.
If you had entered the real estate market to make quick money there is no point hanging around any longer. Even if you had invested for the medium term but are facing liquidity pressures, it is better to find a buyer and pull out. However if there is no compelling reason for you to pull out, it is a better idea to stay invested for the medium to long term, preferably more than 5 years. Also remember the returns from real estate are second only to equity.
Once you are sure you want to sell, get a fix on the price. Buyers are very sensitive about the price. Get an idea of the recent sale price in the locality of your property for similar property. Get an idea of how much prices have fallen since Jan 08 and factor in the correction. Be flexible during negotiations process. Keep in mind that your money is locked in the house (which you don’t need and keep in mind that money has opportunity cost!) so liquidate it and use it for investments or paying off liabilities. If your loan is still running and you wish to sell the house, you will have to involve the loan provider in the process.
If you are not flexible about your price expectations prospective buyers who could have bought your property will move away to mid income and low income segments. The best way to market the property is to list it in the many realty portals available like magic bricks.com, makaan.com, 99acres.com.You could contact your local broker but his reach will be limited and commission could be as high as 1 % of the sales price.
What about unfinished construction?
Visit the site regularly to check if construction is still on. If construction is on full swing, do not stop the regular checks. However if construction has stopped on the site then take up the matter with the developer. Take along like minded people who have also invested in the same project. If the developer does not listen to you, approach the local body of developers. Most forward looking bodies will help you... However if the matter does not get resolved at this level either, approach the consumer court. In numerous instances, consumer courts have taken the developers to task for delay in projects.
Whatever happens don’t worry even if the prices are down right now you will still stand to gain if you have invested for the medium to long term, because the present slowdown is, after all, a cyclical phase.
Comments, views and suggestions are most welcome....
Friday, May 15, 2009
Indian financial environment turning favourable
The Indian stock market rallied due to institutional buying while also tracking the rise in global equities. We have also witnessed an improvement in data from consumer linked sectors like cement, autos and steel, though this may not necessarily point to a reversal in trend. India continues to be a largely domestic economy strengthened by its large base of public sector employees and rural population.
This and the country’s demographic advantage would be the key drivers of the Indian economy over the long term. In the short term however, markets would continue to track signals from domestic consumer linked sectors as well as other global macro-economic data.
The quarterly results to be announced in April could be muted as we are in the midst of a cyclical compression in earnings and might see this trend continuing in the coming fiscal year. Besides this, near term events like G-20 meeting and the outcome of the general elections are to likely influence the direction of the market. Meanwhile, the Reserve Bank of India will continue to exert downward pressure on interest rates in order to spur demand.
India’s expected GDP growth of approximately 5.0%-6.0% p.a. over the next two years continues to be attractive relative to the slowdown in global economies. While equity markets could witness some volatility due to the general elections and a slowdown in demand, the trend of reducing interest rates and relatively high GDP growth rates should have a positive long term impact
My perception has been that at 8,000 levels, the Indian market is very, very attractive from an investor point of view. If we believe EPS estimate, in the worst case scenario, comes out around 812-815. We are at the bottom of the earnings cycle and a falling interest rate scenario, so India should not trade below 10PE. So we have touched the bottom.
When the market went from 17,000 to 20,000, it was overshooting. In the fall, it is undershooting. I think 8,000 is the bottom of the Indian market. The risk reward for an investor at 8,000 is very favourable. This is not the time for investors to go into a shell and say that the market may come down to 5,000 levels so let's wait.
Biggest lesson in down trend that “back to basics” always helps. In the ecstasy we were all carried away by the India growth story and FII inflows. So the market was actually chasing liquidity. I find that value investing really works. It may be painful in the short term, but it stands when investing for the long term.
The Indian stock market rallied due to institutional buying while also tracking the rise in global equities. We have also witnessed an improvement in data from consumer linked sectors like cement, autos and steel, though this may not necessarily point to a reversal in trend. India continues to be a largely domestic economy strengthened by its large base of public sector employees and rural population.
This and the country’s demographic advantage would be the key drivers of the Indian economy over the long term. In the short term however, markets would continue to track signals from domestic consumer linked sectors as well as other global macro-economic data.
The quarterly results to be announced in April could be muted as we are in the midst of a cyclical compression in earnings and might see this trend continuing in the coming fiscal year. Besides this, near term events like G-20 meeting and the outcome of the general elections are to likely influence the direction of the market. Meanwhile, the Reserve Bank of India will continue to exert downward pressure on interest rates in order to spur demand.
India’s expected GDP growth of approximately 5.0%-6.0% p.a. over the next two years continues to be attractive relative to the slowdown in global economies. While equity markets could witness some volatility due to the general elections and a slowdown in demand, the trend of reducing interest rates and relatively high GDP growth rates should have a positive long term impact
My perception has been that at 8,000 levels, the Indian market is very, very attractive from an investor point of view. If we believe EPS estimate, in the worst case scenario, comes out around 812-815. We are at the bottom of the earnings cycle and a falling interest rate scenario, so India should not trade below 10PE. So we have touched the bottom.
When the market went from 17,000 to 20,000, it was overshooting. In the fall, it is undershooting. I think 8,000 is the bottom of the Indian market. The risk reward for an investor at 8,000 is very favourable. This is not the time for investors to go into a shell and say that the market may come down to 5,000 levels so let's wait.
Biggest lesson in down trend that “back to basics” always helps. In the ecstasy we were all carried away by the India growth story and FII inflows. So the market was actually chasing liquidity. I find that value investing really works. It may be painful in the short term, but it stands when investing for the long term.
Monday, March 9, 2009
Section 80 C tax saving instruments
SECTION 80C lists down the instruments, which you can invest in order to save tax.
You can invest a maximum of Rs 1 lakh in all these instruments put together and the entire amount of Rs 1 lakh will be deducted from your taxable income.
You can get a deduction for the following investments you make:
1. A life insurance policy or a unit-linked insurance plan (ULIP). The lock-in period for ULIPs is between 3 to 5 years and the returns vary depending on the performance of your fund.
However, if your annual premium exceeds 20 per cent of the sum assured on your policy, you will not get the tax benefit.
2. A retirement benefit plan offered by mutual funds. Examples are the UTI Retirement Benefit Plan and Templeton India Pension Plan.
3. A Provident Fund, provided that the fund is covered under the Provident Fund Act. This would mean investments made by you through salary deduction in the Employees Provident Fund (EPF) account as also investments that you make directly in the Public Provident Fund (PPF). You can invest up to Rs 70,000 in the PPF. The current rate of return on EPF is 8.5 per cent while that on PPF is 8 per cent.
4. An approved superannuation fund. Usually your employer, on behalf of you, does this by deducting the investment amount from your salary.
5. National Savings Certificates (NSCs).
6. Equity Linked Savings Scheme (ELSS) offered by mutual funds.
7. Pension policies offered by insurance companies where benefits were earlier available under section 80CCC. Earlier, there was a limit of Rs 10,000 on such investments; however that ceiling has now been removed.
8. Bank fixed deposits that provide the Section 80C tax benefit. They come in with a lock-in of 5 years.
Apart from the investments mentioned above, you can also get a deduction on certain expenses that you incur. Mainly, these include the principal repayment on your home loan and the tuition fees you pay on your children’s education.
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