Whenever you are looking to invest in a particular instrument, factors like inherently low risk along with higher capital gains and better tax planning should be given importance. A smart way to achieve this is to take professional assistance from finance experts who have a good understanding of the market and who can create a diverse investment portfolio for you by keeping these factors in consideration.
Tax Saving Instruments
Tax Saving Bonds
· Debt securities issued by PSUs
· Interest earned is non-taxable
· Give preference to AA and AAA rated bonds
· It is ideal to let the lock-in period get completed as returns on maturity are guaranteed
Equity Linked Savings Scheme
· Returns on investment are tax free under section 80C of Income Tax Act.
· Moderate amount of risk involved but the returns are higher in comparison to Fixed Deposits
· Lock-in period is just 3 years
5-year and 10-year National Savings Certificates
· Guaranteed returns on maturity
· Interest earned is taxable as per an individual’s income slab
· There is no ‘tax deducted at source’
Rajiv Gandhi Equity Savings Scheme
· This scheme has been approved on September 21st, 2012 by Finance Minister Mr P Chidambaram
· Motive is to encourage first time investors to adopt equity culture
· Lock-in period of just 1 year
· Maximum allowed investment is 50,000/- and 50% of that amount is eligible for availing tax benefits under section 80CCG of Income Tax Act, 1961.
Tax Saver Fixed Deposits
· As per section 80C, 5-year Fixed Deposits are exempted from tax
· Interest rates range between 8.5-9%
· Exemption is applicable within the 1,00,000/- limit which also includes other investments
· Tax benefits under section 80C
· As per section 10(10D), if the premium every year is less than 10% of the sum assured, then the maturity amount is exempted from tax.
· Under Section 80D, for policies of self, spouse or children, tax benefits of up to 15,000/- is available. These benefits can go up to 30,000/- if you are paying for the health insurance policies of your parents as well.
· Benefits on parents’ health policies is dependent on two factors -
Your age should be under 65 years and the premium payment should be made via cheque or credit card only.
Public Provident Fund
· Excellent retirement planning investment
· Interest rate of 8.7% for 2013-14 with a maximum investment of 1,00,000/- allowed
· Additional benefits: Option of taking loans from your PPF from the beginning of 3rd year onwards till the end of 5th year. You can also make withdrawals from the 6th year onwards.
· Under section 80C, amount on maturity including interest is non-taxable.
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