Tax saving options in India

India’s taxation makes salaried people feel as if they spend on an additional loved one . This woe increases if they’re at 20% or above tax slab. This blog is about the varied tax saving options available to a private .

A. Tax Saving options under tax Section 80 C
ELSS Funds
Equity-linked savings scheme (ELSS) is that the most engaging option under 80C. These funds have the smallest amount lock-in period of three years among all tax saving instruments. aside from this ELSS falls under EEE taxation status. EEE means investment up to ₹ 1, 50,000 isn’t taxable, the returns from ELSS funds aren’t taxable and therefore the entire sum are often withdrawn without attracting any tax . If invested for long-term, ELSS funds can provide 12 – V-J Day annualized returns.

EPF/VPF
Under EPF (Employee Provident Fund) employer and employee both contribute 12% each of employee’s basic salary. Out of this, full 12% of employee’s contribution and three .67% of Employer’s contribution goes towards EPF. The remaining 8.33% of Employer’s contribution goes towards EPS (Employee Pension Scheme). The EPS contribution features a maximum limit of 1250 Rs.

PPF
PPF is another debt based savings instrument almost like EPF with certain changes because it doesn’t depend upon your employment. almost like EPF this also falls under EEE taxation status

Only one PPF account are often opened per individual. Minimum ₹500 should be deposited per annum failing which account are going to be deactivated and therefore the user should pay a fee of ₹50 to reactivate it. Maximum deposit which will be made during a year is ₹1, 50,000. an individual can make only 12 deposits per annum . there’s a lock-in period of 15 years before which account can’t be closed. This account are often opened in any nationalized banks and post offices.

Sukanya Samriddhi Scheme
Sukanya samriddhi scheme are often employed by parents who have a woman child aged but 10 years. are often “> this is often very almost like PPF apart from the duration where contributions should be made for 14 years and withdrawal can be done only the kid attains 21 years. Partial withdrawals also can be made at 18 years. The rate of interest for this scheme is generally 0.5% above PPF rate of interest .

Tax saving fixed deposits
Tax saving fixed deposits offered by banks and post offices are almost like normal fixed deposits except they need a lock-in period of 5 years and are tax-exempt under section 80C. The returns though guaranteed are low comparing to EPF and PPF. Also, they’re under ETE tax status where an investor must pay tax on interest earned on the fixed deposit.

National savings certificate (NSC)
NSC is obtainable by Govt. of India through post offices. they provide similar interest rates thereto of PPF. there’s no maximum limit for purchase of certificates but you can’t get Tax exemption above your 80C limit. Interests on NSC are taxable because it falls under ETE tax regime.

Life insurance Premiums/ULIPs
Any premium paid towards life assurance regardless of conventional policies/ULIPs qualifies for tax exemption under section 80C. However, tax exemption is valid under 10(10D) (during withdrawal) only annual premium is a smaller amount than 10% of sum assured.

National pension Scheme
NPS invests in various sub-funds across all asset classes (Equity, Govt bonds, and personal bonds) where investor’s money is invested as per allocation provided by the investor.

In NPS an employee’s contribution is eligible for a tax write-off of up to 10 percent of his basic salary under Section 80CCD(1) within the general ceiling of Rs 1.5 lakh under Section 80CCE. The employer’s contribution is additionally eligible for a tax write-off of up to 10 percent of employee’s basic salary under Section 80CCC(2) over and above the limit of R1.5 lakh provided under Section 80CCE. Self-employed individuals are eligible for a tax write-off of up to 10 percent of gross income under Section 80CCD(1) within the general ceiling of R1.5 lakh under Section 80CCE. It also qualifies for extra ₹50,000 tax exemption under section 80CCD aside from regular 80C limits.

NPS matures at retirement, i.e. at the age of 60 years. On maturity one must buy an annuity for a minimum of 40% of the corpus which is taxable. Out of remaining 60%, 40% are often withdrawn tax-free and remaining 20% will attract tax as per your tax slab at that point . Hence for NPS, it’s more a tax deferral than tax saving.

Tuition Fees
Tuition fees purchased 2 children will qualify for tax exemption under the 80C limit. this will be for any school or college where the course is full-time.

Registration Fees/ home equity credit principal
Principal repayments on home equity credit are eligible for tax exemption under 80C limits. This exemption is additionally applicable on stamp tax paid, registration fees and transfer expenses etc.

Since of these 10 exemptions fall into 80C maximum combined tax break that would be availed under of these exemptions is ₹1, 50,000 per annum .