It is that time of the year when everyone is scrambling to finish the tax planning for 2010-2011. We have put together a quick guide which can help you save money by using all avenues completely. We have only listed those items which you can use right now till 31st March 2011.
For salaried people, who have already submitted their investment declaration proof for the year
Even if you are salaried and your company has already taken your investment proofs and you did not maximise the tax benefits, you can still invest and can claim income tax re-imbursement. The income tax re-imbursement process is now very smooth and the money gets automatically credited to your account. So read on…
Main Investment options which are eligible for tax deductions
Premium paid for Life Insurance policies (which include ULIPs) under Section 80C
This is by far one of the most popular modes chosen by a lot of people as you not only save tax but also ensure insurance cover for your family and/or also build an investment corpus for future needs. The best part is that the maturity amount in case of insurance policies is also tax free. To be noted: The maturity proceeds of only those policies in which the premium amount is less than 1/5th of the sum assured is eligible for tax exemption. Click here to compare life insurance policies now.
Equity Linked Savings Schemes (ELSS) under Section 80C
This is an increasingly popular option for those trying to save tax and build an investment corpus over a large period of time. These are mutual funds and hence help the investor grow their investment in line with the markets. This mode is not completely risk free but when compared to the returns it can give, it becomes a very attractive proposition.
Public Provident Fund (PPF) under Section 80C
This is another great place to invest in case you are trying to save tax and get moderate returns. The rate of return may increase or decrease as decided by the Government of India from time to time. This is one of the safest and more poplar options for both salaried and self-employed individuals. To be noted: You can only invest upto Rs. 70,000 in a year for tax benefits.
National Savings Certificate under Section 80C
This is another Government of India guaranteed tax free investment option. It is gradually becoming less popular though in the current times. It can be purchased from post offices across India and gives a rate of interest of 8% compounded half-yearly
Bank Fixed Deposit under Section 80C
Fixed deposits in banks for 5 years or more also qualifies for tax exemptions. But the interest rates may not be as attractive as the other options and keep changing from time to time. The ease of doing this makes it a last minute option for a lot of people though! The interest earned from these FDs would be part of the taxable income.
Infrastructure Bonds under Section 80CCF
Over and above the Rs. 1,00,000 that you can tax free in Section 80C, these bonds provide an additional opportunity to save tax. We can invest upto Rs. 20,000 as tax free component. The maturity benefits would be taxable though.
Health Insurance Premiums under Section 80D
Health insurance is a often neglected but very critical component in our financial well-being. Given the escalating costs of medical facilities, it makes a lot of sense to invest a small amount every year to purchase a health insurance policy. Premium amount of Rs. 15,000 is tax free for self, spouse and children. You can claim an additional Rs. 15,000 as tax free if health plan has been purchased for parents. You can compare health insurance plans now at our website.
Donations to NGOs/Charitable institutions under Section 80D
Well this does not strictly qualify as an investment but is still an option in case you want to loosen your purse for a noble cause.
There are more areas in which you can invest and save tax, like for example, the interest and principal component of your home loan EMI or even on your education loan. But these are not avenues which should be tried in the last moment in a hurry.
Only the most popular and practical options which can be done in the next 6 weeks till 31st March 2011 have been mentioned here.
We hope you find this useful.
