Tax saving is the primary goal of many, including men, women, small or big businesses, young, old etc. The question here is, which tax saving instrument should be used in order to maximize the savings. If you wanted to know the answer to this question from a long time, then following save tax India tips will prove very helpful to you:
- In case you have been looking for assured-return tax planning:
- Public Provident Fund-PPF: The time duration is 15years and minimum to maximum investment in PPF is 500-70,000. The deposit can be made annually or monthly. If the deposit exceeds upper limit, then no rebate will be given and the amount will be refunded with no interest on it. If you have PPC for your children and spouse too, then remember that aggregate should not exceed the upper limit. Return on PPF is 8% p.a. In case you wish to withdraw funds from PPC, you can do so only from 7th financial year. Finally, the deduction is not only up to 70,000 but the interest income is also exempted.
- National Savings Certificate-NSC: Tenure is 6 years and interest is compounded half yearly at rate of 8% p.a. Minimum amount is 100 INR and there is no maximum deposit amount limit. Only in case of death of NSC holder is the refund possible. Rebate can be applicable to only 100,000 INR and also on accrued interest that is reinvested. However, tax is charged on interest income in the year it is accrues.
- Post Office Time Deposits-POTD and Bank Deposits: POTD holds minimum deposit of 200 INR; time can be 1-5 yrs; however, tax rebate is applicable on amount up to 100,000 INR and on 5-yrs maturity tenure only. Return varies from 6-8.5% p.a. Premature withdraw can be made after 6 months from deposit date, yet no interest shall be paid in that case. Similarly, bank deposits of 100-100,000 for tenure of 5 yrs are considered under rebate.
- Senior Citizens Savings Scheme-SCSS: This is for people above 60 yrs of age or in special cases for those above 55 yrs of age and voluntary retirement. Tenure is 5 yrs and deposit can vary from 1000-1,500,000 INR, yet deduction is considered for 100,000 INR. Return is 9% p.a. and premature withdrawals are also supported after 1 yr from account opening date. Between 1-2 yrs, the amount deducted on initial deposit is 1.5% in case of premature withdrawal and 1% after 2 yrs. Tax deduction is valid for amount up to 100,000 INR and interest income is tax chargeable.
2. In case you have been looking for “market-linked” instruments for save tax India:
- National Pension Scheme-NPS: Age limit is 18-60. This account is divided into two tiers: Tier-I has minimum annual investment as 6000 INR, divided in at least 4 installments a year. Only 20% out of total investment can be withdrawn before the account holder reaches the age of 60. The rest of the amount is to be used for buying a life annuity. Tier-II holds the minimum amount of 1000 INR, to be deposited in minimum 4 installments a year and a minimum balance of 2,000 INR is to be maintained at financial year’s end. If these criteria are not complied, 100INR is the penalty levied. However, premature withdrawals can be made without any limits under this account. The rebate is on 100,000 INR however, any withdrawal amount will subject to payment of tax.
- Equity Linked Savings Schemes-ELSS: the minimum amount is 500 INR and no upper limit for deposit. However, the investment made is put to lock-in period, which is compulsory for 3 yrs. This distinguishes the ELSS from any other regular equity funds. Rebate is applicable on a total of 100,000 INR.