Friday, March 29, 2013

Last day: Here's a last minute tax savings guide | Firstpost

With less than a week left for you to make tax saving investments for FY 2012-13, there is a good possibility you might just make the wrong investments in a hurry to avoid missing the deadline and keeping? in mind the sole objective of tax savings. After all as they say, ?Invest in a hurry, regret in leisure.? Here?s a quick guide for last minute tax savings instruments. So, you can make an informed decision, and not simply rely on your agent?s sales pitch.

For the sake on convenience, we will divide the instruments into two. Those which fall under Section 80 C and the others.

Section 80 C investments: Before, we begin keep in mind that your Employee Provident Fund (EPF) would make the major part of the Section 80 C deduction. The maximum deduction permitted under this section is Rs1 lakh.

1) Public Provident Fund: You get an 8.8 percent tax-free investment. Lock in period is 15 years and maximum amount Rs 1 lakh per financial year. Read more here.

2) Life insurance premiums: Premium amounts for self or wife and children. Premium paid before 31 March 2012 will get a deduction only to the extent of 20 percent of the actual capital sum assured. And policy issued after the 1st day of April 2012 will get a deduction only to the extent of 10 percent of the actual capital sum assured. We strongly recommend you buy only a Term Plan, as life insurance.

3) National Savings Certificate: Five-year NSC give?s 8.6 percent returns and for 10 years it?s 8.9 percent. Interest income you earn every year is taxable. But, as the interest is also reinvested, it becomes part of the overall section 80C contribution.

Representational image. Image courtesy: Moneycontrol

Representational image. Image courtesy: Moneycontrol

4) Five-year tax savings fixed deposit: The lock-in period is five years, without any pre-mature withdrawals. Rate varies from bank to bank. Interest earned is taxed, maximum investment limit is Rs 1 lakh.

5) Equity-linked savings scheme: This gives your money equity exposure and the returns here are market-linked. Keep in mind that this comes with a lock-in period of three years. The dividends you earn are tax-free.

6) Pension plans (traditional): Maximum deduction up to Rs 1 lakh for premiums paid for pension plans under Section 80 CCC.

7) Senior citizen savings scheme (SCSS): Only for senior citizens. They offer 9.30 percent as interest. Maximum investment allowed is Rs 15 lakh in a financial year, but only Rs 1 lakh will get benefit under Section 80 C.

8) Two important deductions are: Repayment of principal of your home loan gives you a deduction under 80C of up to Rs 1 lakh.? And, you also get under a deduction Section 80C for tuition fees paid for your children?s full-time education in India.

Non- Section 80 C deductions: Apart from Section 80 C investments options, here are a few more investment options which give you tax benefit.

9) Section 80D ( Medical Insurance policy) : Here you get tax benefits in the form of deduction for premiums you pay for medical insurance. The benefit is up to Rs 15,000 for self and family or if you buy policy for non-senior citizen parents. You can claim within the existing limit a deduction of up to Rs 5,000 for preventive health check-up. Read more here.

10) Section 80DDB (Medical treatment of certain illness): If you are less than 65 years old during the previous year, then the deduction limit is Rs 40,000. If you are a senior citizen (more than age 65), then the deduction limit is Rs 60,000. Read more here.

11) Section 80E (Interest paid for education loan): You can avail of this tax deduction as long an education loan is taken for the spouse, children or self. The deduction is permitted in the initial assessment year or the year in which you start paying the interest on the loan and seven more years immediately after the initial assessment year. Read more here.

12)? Section 24( Home loan interest amount): You get a tax deduction of up to Rs 1.5 lakh for the interest amount you pay towards home loan. The Rs 1.5 lakh limit on the interest amount is applicable when you?ve taken a loan for a self-occupied house. If it?s not a self-occupied house (rented out) there is not limit of Rs 1.5 lakh. Read more here.

13) Section 80 TTA (Savings accounts): Here savings account interest income up to Rs 10,000 will get a tax deduction. This deduction of Rs 10,000 on savings account interest income is all bank accounts put together. Read more here.

14) Section 80 G:? Donations to certain charitable organisations and institutions you get tax deduction under Section 80 G. The amount of deductions can be either 50 percent or 100 percent, depending upon the type of institution you donate to.

Now that you know about tax savings options, don?t blindly buy the insurance policy your agent wants to sell you as a tax saving tool. Remember, investments made in a hurry to save taxes are more likely to result in you becoming a victim of mis-selling.

Source: http://www.firstpost.com/investing/last-day-heres-a-last-minute-tax-savings-guide-673889.html

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