Guide to .. Tax Management ,Tax Planning and Tax Saving
 

Tax Saving Schemes

Tax Savings is an effective measure to ensure that people save some of their tax liability in a legal way. There are many investment options which provide deductions to the assessee and some of them are listed below. The tax saving schemes are the one of the part of tax planningTax planning is legal and everyone should do it to increase wealth.

SENIOR CITIZENS SAVINGS SCHEME

• Individual above 60 years (VRS persons 55 and above) can invest.


• Duration 5 years. Can be extended for further 3 years.

• Multiple/Joint accounts are allowed.

• Maximum Limit 15 Lakh.

• Lock-in period 1 year. Premature closure allowed with penal interest.

• Interest @ 9.2% p.a. payable Qly.

• 1.5 Iakh invested earns Rs. 3450 per Qtr.

• Interest earned is taxable.

• Tax Exemption: Eligible for exemption U/s 80C for overall Invest. upto Rs. 1.5 lakh. Int. earned is taxable.

POST OFFICE TIME DEPOSIT ACCOUNT

• An individual can open only one account besides his GPF account.

• Option to pay each contribution in one Iumpsum p.a. or in 12 installments.

• Period: 15 yrs.(Min. 16 annual contributions). Can be contd. Further every 5 yrs.

• Any individual can open an account singly or jointly.

• More than one account can be opened without any limit.

• Account can be opened for 1,2,3 and 5 years.

• Interest for 5 years deposit is 8.4%

• Premature withdrawal after 1 year attracts 2% penalty on interest applicable.

• Amount withdrawn before 5 years period, tax will have to be paid on the withdrawn amount treating it as the income of that year.

• Tax Exemption: Only 5 years term deposit with a Max. Investment of Rs. 1.5 Iakh eligible u/s 80C.

PUBLIC PROVIDENT FUND (PPF)

• Option to continue after maturity for every 5 years.

• Investment: Mm. 500; Max : 1.5 lac p.a.

• Int. @ 8.7% compounded annually.

• Can withdraw 50% of the balance from 7th year onwards.

• An amount equal to withdrawal can be invested from current year’s income to make the account a self sustaining one.

• Loan upto 25% of balance available (2 years ago) is allowed upto the end of 5th year.

• Second loan is given after clearing the first loan.

• No loan is given after 6 years from the date of first subscription.

• After 15 years entire balance can be withdrawn.

• Interest earned is totally exempt u/s 10(11).

• Tax Exemption : lnvest uptoRs.1,50,000 qualifies for deduction u/s 80C.

BANK DEPOSITS

• A term Deposit to be opened with a scheduled Bank in the prescribed form.

• Mi Investment Rs. 100/-Max. 1 Lakh.

• The Term will be 5 Years.

• Premature encashment not permitted.

• Income-tax benefit amount of term deposit invested along with PPF/LIC/ NSC/ULIP, etc upto a max. of Rs.1.5 Lakh eligible for deduction u/s 80C.

• interest earned on the deposit is taxable.

INSURANCE PLAN (ULIP)

• Can be invested Singly/Jointly.
• Duration: 10 or 15 years.
• ULIP can be taken in the name of spouse & children - majorlminor.
• Provides Life Insurance, Accident Insurance coverage and also reinvestment of dividend in units.
• Target amount: Minimum - Rs. 15,000. Maximum - Rs. 5 lakh.
• Personal Accident cover upto Rs. 50,000.
• On maturity, NAV+Bonus @ 5% for 10 yrs & 7.5% for 15 yrs term (cash equivalent of units will be paid).
• Can remain in the plan to participate in further growth (0.5% additional maturity bonus).
• Tax exemption : Investment upto Rs.1.5 lakh is eligible for taxexemption U/s 80C. Dividend declared is fully exempt U/s 10(35). Maturity bonus is taxable in the year of maturity.

LIC’S JEEVAN AKSHAY VI

• Immediate Pension Plan for individual between 30 & 85 years.
• Mi Investment: Rs. 1,00,000.
• e.g. Investment of Rs. 10 lakh forage at entry 40 will give monthly pension of Rs. 5892.
• Tax Exemption : Eligible for exemption uls BOC for overall Investment upto Rs. 1.5 lakh.

EQUITY LINKED SAVINGS SCHEME (ELSS)

• Most favourite investment

• Open ended. Lock-in 3 period years.
• Many of the Funds have given excellent returns during recent past. Max. tax benefit plus max. returns.
• Tax Exemption/Benefit: Eligible for exemption u/s 80C for overall Investment upto Rs. 1.5 Iakh.
• Dividend earned is exempt u/s 10(33).

PENSION PLANS

• Any individual between 18 & 70 years can take a policy.
• Investment: Mm. Premium - Rs. 2,500 p.a.; Rs. 10,000 for Single Premium; Max. - No Limit.
• Minimum pension starting age is 50 years & maximum is 79 years.
• Guaranteed Pension either for 5,10,15, 20 years or for life time.
• Option to commute 25% of Pension.
• Tax Exemption : Premium paid upto Rs. 1.5 Lakh pa., either under Single Premium or regular Policy is totally exempt u/s 8OCCC (Under 80C)

LIFE INSURANCE POLICIES

• Variety of Plans available.
• Major Benefit: Life Risk Cover.
• Encourages to save compulsorily.
• Besides covering life risk, gets tax benefit both at entry (premiums paid) & exit point (Maturity + Bonus).
• Asset is created without having one.
Tax Exemption: Eligible u/s 80C for overall Investment upto Rs.1.5 lakh & maturity amount (Investment + Bonus) is totally exempt u/s 10(100). For policies taken on or after 1.4.2003, prem. exceeding 20% of the S. A. & policies taken on or after 1.4.2012 prem. exceeding 10% of the S.A. in any year, will not enjoy tax free returns uls 10 (10 D) or benefit u/s 80C.

NATIONAL SAVING SCHEMES

• Can buy Single / Jointly.
• Duration 6 years / 10 years..
• Inrerest rate is 8.5% p.a. for 5 years. & 8.8% for 10 years..
• Interest accrued between 1st. & 5th. year is deemed to have been reinvested.
• Investment & deemed reinvestement upto Rs. 1,50,000 is eligible U/s 80C..

TAX SAVING SCHEMES ELIGIBLE U/S 80C

Saving Instrument

Rate of mt. p.a

Lock.in Period
(in yrs)

Aggregate Tax
Exemption
(Rs.)

Bank Deposits — Tax Saving

8% -  9%

5

1.5 Lakh

Equity linked (EIss) Fund Scheme

Market defined

3

1.5 Lakh

National Savings Certificate (NSC)

8.50%

5

1.5 Lakh

Post Office Time Deposit A/c. (5 yrs.)

8.50%

5

1.5 Lakh

Public Provident Fund ( PPF)

8.70%

15

15. Lakh

Unit-Linked Insurance Plan (ULIPs)

Market defined

Variable

1.5 Lakh

Prem. paid on Life Insurance Policies
including pension plans

5% - 7%

3

1.5 Lakh

Senior Citizen Saving Scheme

9.20%

5

1.5. Lakh

 

Life insurance premium paid for Parents (Fatheri Motheriboth) or in-laws is not eligible for deduction uls 80C.

 

If premiums are paid for more than one insurance policy, all the premiums can be included. Insurance premium paid for self, spouse or children is allowed as deduction uls 80C of 1.T. Act

 

Children for the definition includes dependant as well as independent, married as well as bachelor.

 

It is not necessary to have the insurance policy from UC - even insurance bought from private players can also be considered here.

 
Deduction uls 80C for Deposit in LIC / NSC / PPF / Housing loan Repayment etc. increased to a max. of Rs. 1,50,000 deduction uls 80CCD for contribution to New Pension Scheme allowable upto Rs. 1,00,000. Total deduction U/s  80C,  8OCCC  & 80 CCD allowable upto Rs. 1,50,000.

 

 
 
 
 
 
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