Union budget for the financial year 2014-2015 has brought a breather for taxpayers by recommending an increase in the deduction limits. You can save tax by using these popular options. Let's know about them shall we! get more investment options for financial year 2015-2016
Tax Saving Option Under 80C
Public Provident Fund (PPF)
Public Provident Fund (PPF) has always been a lucrative tax-saving option for the investors. Annual investment limits under this scheme has now been increased to INR 1.50 Lakhs. So, what makes PPF profitable? The interest is compounded annually on the principal amount. And, upon maturity you will receive almost double of the principal paid towards PPF. What more, the maturity amount is tax-free. It offers investors a high flexibility unlike other tax-savings instruments. A PPF account can be opened in any bank or in the post office. You can either pay a lump sum of INR1.50 Lakhs or opt for installments. However, you need to invest at least INR 500 annually to keep your account operational. Otherwise, you will have to pay a penalty of INR 50 to re-activate your account. A PPF account matures in 15 years, but you can increase the tenure in blocks of 5 years, post maturity period.
Unit Linked Insurance Plans (ULIPs)
Since the new guidelines were implemented in 2010 on ULIPs, it has become easier to invest in them. The new online program launched by HDFC Life charges only 13.5% of fund management. Only charge is for risk coverage with no other additional fees. Compared to the direct mutual fund investments, ULIPs have become more affordable now. However, to gain the desired corpus from ULIPs, you need to hold your account for at least 10 to 12 years.
Equity Linked Savings Scheme (ELSS)
Among all the investment options Of investment under 80C tax savings ELSS offers the minimum lock-in period of 3 years. However, those who want to build a sizeable corpus must keep their money for a longer duration. Compared to regular equity funds where the minimum limit of investment is INR 5000, the ELSS offers a respite with a minimal balance of INR 500. To reap good benefits, you should invest money in ELSS funds on a regular, installment basis.
Senior Citizen Savings Scheme (SCSS)
For senior citizens SCSS offers ideal tax savings options with guaranteed returns. Though, its benefits are somewhat limited due to an upper limit of INR 15 Lakhs. Interest rates are 100 base points higher than the yield from 5 years government bonds. Interest amounts generated four times every year on 30th June, 31st March, 31st December and 30th September.
Bank Fixed Deposits (FD) or National Savings Certificates (NSCs)
Even the high interest rates on FDs after five years don’t make them an interesting option because the interest amount is completely taxable. So, for those who fall under the tax brackets of 20% to 30%, it is not an attractive option, as the PPF.
National Pension Scheme (NPS)
Those who are looking for an affordable, feature rich and easy investment option should not look beyond NPS. You need to invest a minimum amount of INR 6000, which can be done in easy installments of INR 500 each. As an investor you decide how much of the payment will go towards equity, gilts, or corporate bonds.
Life Insurance Plans
As per the Insurance Regulatory and Development Authority (IRDA) guidelines, customers can reap good benefits from life insurance plans.
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