Sunday, 11 September 2011

Top Ten tax saving investment options

Income Tax Act allows you to invest in certain tax saving investment schemes and save tax for the same under section 80C, 80CCF and some other sections. You can invest in these schemes up to a certain limit and can reduce the amount from your total income and should give income tax only for the remaining income. Top Ten such Tax saving investment Schemes can be classified in to Income Schemes, Insurance Schemes and Equity related Schemes.

Tax saving income schemes includes Public Provident Fund (PPF), Employee Provident Fund (EPF),  Tax-saving Bank Fixed Deposits, National Savings Certificate (NSC) Senior Citizens Savings Schemes and Infrastructure Bonds.

Equity related Tax Saving Schemes are Equity Linked Savings Schemes (ELSS), Unit linked Insurance Plan (ULIP).

Insurance related Tax Saving Schemes are Life Insurance Schemes and Medical Insurance Schemes.

All the above Tax Saving Schemes except Medical Insurance and Infrastructure Bond come under section 80 C of income tax act where a total of Rs. 100000 can be exempted from your income. Even if you invest more than Rs. 100000 in all the schemes which come under section 8o C, you can claim an exemption only for Rs. 100000.

Under Section 80CCF you can claim up to Rs. 20000 for investment in Infrastructure bonds of approved financial companies. Then the aggregate amount of Rs. 120000 can be exempted under both sections 80 C and 80 CCF.

But for medical insurance you can claim a yearly premium up to Rs. 15000 for the medical insurance of your family including spouse and children.  If any of the insured person  is a senior citizen (Those who completed the age of 65 years – 60 years is not considered as a senior citizen  for this case) the maximum amount under would be Rs. 20000. And you can claim another Rs. 15000 for the medical insurance of your parents or parents in law (Those who completed the age of 65 years – Age 60 years is not considered as a senior citizen for this case)

PPF (Public Provident Fund) and EPF (Employees Provident Fund) are come under EEE (Exempt Exempt Exempt) tax saving scheme which means the tax is exempted when you invest the money; tax is exempted when you get income (interest) and tax is also exempted when you withdraw the money at maturity. So you will get an interest free income from both of these tax saving investment schemes.

We strongly advise you to invest in tax saving schemes, which help you to reduce your tax liability and enhance your investment and investment habit.

Related Posts
Advantages of e-filing Income Tax Return
Declare tax saving investments to employer
All about Public Provident Fund Scheme

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