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Article written by Chandrakant Mishra | Post at planmoneytax


  • Are you one of them who do not plan things on time?

  • Have you procrastinated on tax saving investments till December?

  • Are you now struggling to invest ‘anywhere’ so that you can save tax?

  • Are you the gullible person who can be ‘miss-sold’ by insurance agent?

  • Did you not decide your tax saving option? Still confused?


Here is the list of top 10 tax saving investments. 


1- Public Provident Fund


Public Provident Fund is my topmost tax saving option. It gives you full tax saving with maximum safety. There is a lot of flexibility and ease also. Anyone can invest in this. Almost every big bank offers this facility.

Employees get the benefit of EPF which gives them retirement saving with tax saving. For professional and self-employed PPF plays this role. Return and conditions of PPF withdrawal is same as EPF. But in PPF you get much more flexibility. You can ivest in PPF up to the limit of 80C investments.

Note – PPF starts calculating 15 years from next April. It means that if you start investing since Dec 2013, your PPF account will mature in April 2029. But if you invest during 1 – 5 April your account would be considered from same financial year. Also put your money before 5 of every month to get the interest of that month.

 

2- Employee Provident Fund


Organised sector employee must be aware of this tax saving investment. It is mandatory for employers to deduct 12% of the employee salary towards employee provident fund (EPF). Employer also contribute the same amount. This investment is qualified for tax deduction. Fewer people know that you can invest more than the prescribed 12%. This excess amount also get tax benefit. The EPF can be transferred from one job to another easily. After leaving the job you can withdraw EPF.

 

3- Equity Linked Saving Scheme (ELSS)


Equity Linked Saving Scheme (ELSS) has minimum lock in period. Your money is locked only for three years. But you should not always exit from it after three years. Equity investments give good return in longer period. You can even rotate you investment after three years. By this you will be spared of fresh investment for tax saving after the three years. Also If you need some money before three years then choose the dividend option. It will give tax-free dividend as well. SIP would be perfect way to invest in these funds. It averages the ups and downs of market. You can invest more than the 80C limit in the ELSS.

 

4- National Pension System (NPS)



  • National Pension System (NPS) is not much popular tax saving investment. But it gives you a happy retirement life as well as tax saving. You can claim investment in the NPS for tax deduction under the 80C. But it has a big drawback also. Government did not make maturity proceedings tax free.

  • You will get money only after the retirement.

  • From the 60% of the maturity amount you have to take annuity policy.

  • Rules are somewhat stiff but it is designed to give you happier retirement life. Government has added some flexibility, which has made it more attractive. You can read in details about it here


 

5- Tax Saving Fixed Deposit


These are just like any other fixed deposit. You will get similar interest rate also. But your money will be locked for 5 years. You can’t withdraw your money before maturity. Also Interest earning would be taxable. Ease and peace of mind is the biggest plus point of this tax saving investment.

 

6- Term Insurance


Term Insurance does not give you ant maturity amount . You can save tax and have a big peace of mind. This gives  life cover so that our family would not suffer in distress if there is any eventuality with us. These days online term plans are cheaper and you can have 1 crore term plan in 10-15 thousand annually. HDFC Life, Birla SunLife gives these online term plans.

 

7- National Saving Certificate


National saving certificates (NSC) are similar to Tax Saving Fixed Deposit. But today it gives less return than Bank Fixed Deposit. Also now finding post office is difficult than banks. But NSC should be considered more safe than FD, since your money remains with government of India.

  • NSC also gives the benefit of tax saving under 80C. Unlike ELSS, PPF or EPF interest is taxable in case of NSC. There is one  extra tax benefit with NSC. As your interest is considered accrued every year. But it stay invested so you can claim this interest also for tax deduction.

  • There is no maximum limit of investment.

  • Rate if Interest if 8.50% for 5 years and 8.80% for 10 years.

  • You can take loan from banks also using this certificate as collateral.


For more information visit India Post Website

 

8- Senior Citizens Saving Scheme


Senior Citizen Saving Scheme is designed for elderly and it is one of the best tax saving scheme for them. Even senior citizen who don’t need tax saving can also invest in this scheme. It gives them regular income as interest is deposited regularly in their account.

  • Tax Saving is under the 80C Scheme.

  • Interest is taxable. But as many Senior citizen earns less than their limit of tax so this should not be any hindrance.

  • This Scheme is for 5 years but one can withdraw the amount with some conditions.

  • Maximum limit for this account is 15 Lakhs.

  • Minimum limit is 1000.

  • Interest Rate is 9.2% compounded quarterly. Interest is credited in account on 31 March, 30 June, 30 September and 31 December irrespective of your date of deposit.

  • It is very safe as your money remains with Government of India.


 

9- Unit Linked Insurance Products (ULIP)


Unit Linked Insurance Products give you insurance cover as well as investment. ULIPs invest some amount of your money in shares. You can decide which proportion of your fund should be invested in shares. ULIP has some positives but many negatives also.

Positives

  • ULIPs are very tax efficient. You can save tax from investment under 80C. While maturity amount would not be taxed also.

  • It forces you for regular saving.

  • You are forced to have some insurance cover if you don’t have one.

  • You can continuously change asset allocation


Negatives

  • You can’t withdraw your money before 5 years.

  • You remain under-insured because cover is only 10-20 times of the premium.

  • ULIPs are somewhat opaque. While Mutual funds are analysed and compared by many research agencies. less information is available about ULIPs.

  • Initially charges are higher than normal Mutual fund.

  • If there is under performance for long period you can’t switch another funds house. Maximum you can do is allocate more fund to another category. Suppose you chose equity option for building the wealth. But equity fund is under performing than the benchmark. Then you will not have the option to switch over to another equity fund. You can only switch to balanced or debt fund, Which might also give lesser return.


 

10- Health  Insurance


I do not need to remind you that Health is Wealth.  Best part is that it gives tax saving benefit also. The premium you pay for  health insurance is tax-deductible under Section 80(D). You can get tax saving up to 40,000 of expense in health insurance and health check up.

  • You can avail tax deduction on the expense of health insurance for you and family. Limit for tax deduction is 15,000.

  • You can additionally avail tax deduction for your parents health insurance. Limit is 20,000 for senior citizen and 15,000 for non senior citizen.

  • Health checkup for you and family is also tax free. The limit is 5,000 annually.


 

There are many other tax saving options as well. Life Insurance Endowment plans, pensions plans, RGESS and tax free infrastructure bonds. I have listed top 10 among these. I would like to also mention about most popular tax saving plan that is life insurance schemes. These Endowment schemes are one of worst tax saving option. It gives you below inflation return, high commission and less flexibility. One should avoid these, agents are pushing hard only to get hefty commission.

10 Best Tax Saving Investments







Article written by Chandrakant Mishra | Post at planmoneytax


  • Are you one of them who do not plan things on time?

  • Have you procrastinated on tax saving investments till December?

  • Are you now struggling to invest ‘anywhere’ so that you can save tax?

  • Are you the gullible person who can be ‘miss-sold’ by insurance agent?

  • Did you not decide your tax saving option? Still confused?


Here is the list of top 10 tax saving investments. 


1- Public Provident Fund


Public Provident Fund is my topmost tax saving option. It gives you full tax saving with maximum safety. There is a lot of flexibility and ease also. Anyone can invest in this. Almost every big bank offers this facility.

Employees get the benefit of EPF which gives them retirement saving with tax saving. For professional and self-employed PPF plays this role. Return and conditions of PPF withdrawal is same as EPF. But in PPF you get much more flexibility. You can ivest in PPF up to the limit of 80C investments.

Note – PPF starts calculating 15 years from next April. It means that if you start investing since Dec 2013, your PPF account will mature in April 2029. But if you invest during 1 – 5 April your account would be considered from same financial year. Also put your money before 5 of every month to get the interest of that month.

 

2- Employee Provident Fund


Organised sector employee must be aware of this tax saving investment. It is mandatory for employers to deduct 12% of the employee salary towards employee provident fund (EPF). Employer also contribute the same amount. This investment is qualified for tax deduction. Fewer people know that you can invest more than the prescribed 12%. This excess amount also get tax benefit. The EPF can be transferred from one job to another easily. After leaving the job you can withdraw EPF.

 

3- Equity Linked Saving Scheme (ELSS)


Equity Linked Saving Scheme (ELSS) has minimum lock in period. Your money is locked only for three years. But you should not always exit from it after three years. Equity investments give good return in longer period. You can even rotate you investment after three years. By this you will be spared of fresh investment for tax saving after the three years. Also If you need some money before three years then choose the dividend option. It will give tax-free dividend as well. SIP would be perfect way to invest in these funds. It averages the ups and downs of market. You can invest more than the 80C limit in the ELSS.

 

4- National Pension System (NPS)



  • National Pension System (NPS) is not much popular tax saving investment. But it gives you a happy retirement life as well as tax saving. You can claim investment in the NPS for tax deduction under the 80C. But it has a big drawback also. Government did not make maturity proceedings tax free.

  • You will get money only after the retirement.

  • From the 60% of the maturity amount you have to take annuity policy.

  • Rules are somewhat stiff but it is designed to give you happier retirement life. Government has added some flexibility, which has made it more attractive. You can read in details about it here


 

5- Tax Saving Fixed Deposit


These are just like any other fixed deposit. You will get similar interest rate also. But your money will be locked for 5 years. You can’t withdraw your money before maturity. Also Interest earning would be taxable. Ease and peace of mind is the biggest plus point of this tax saving investment.

 

6- Term Insurance


Term Insurance does not give you ant maturity amount . You can save tax and have a big peace of mind. This gives  life cover so that our family would not suffer in distress if there is any eventuality with us. These days online term plans are cheaper and you can have 1 crore term plan in 10-15 thousand annually. HDFC Life, Birla SunLife gives these online term plans.

 

7- National Saving Certificate


National saving certificates (NSC) are similar to Tax Saving Fixed Deposit. But today it gives less return than Bank Fixed Deposit. Also now finding post office is difficult than banks. But NSC should be considered more safe than FD, since your money remains with government of India.

  • NSC also gives the benefit of tax saving under 80C. Unlike ELSS, PPF or EPF interest is taxable in case of NSC. There is one  extra tax benefit with NSC. As your interest is considered accrued every year. But it stay invested so you can claim this interest also for tax deduction.

  • There is no maximum limit of investment.

  • Rate if Interest if 8.50% for 5 years and 8.80% for 10 years.

  • You can take loan from banks also using this certificate as collateral.


For more information visit India Post Website

 

8- Senior Citizens Saving Scheme


Senior Citizen Saving Scheme is designed for elderly and it is one of the best tax saving scheme for them. Even senior citizen who don’t need tax saving can also invest in this scheme. It gives them regular income as interest is deposited regularly in their account.

  • Tax Saving is under the 80C Scheme.

  • Interest is taxable. But as many Senior citizen earns less than their limit of tax so this should not be any hindrance.

  • This Scheme is for 5 years but one can withdraw the amount with some conditions.

  • Maximum limit for this account is 15 Lakhs.

  • Minimum limit is 1000.

  • Interest Rate is 9.2% compounded quarterly. Interest is credited in account on 31 March, 30 June, 30 September and 31 December irrespective of your date of deposit.

  • It is very safe as your money remains with Government of India.


 

9- Unit Linked Insurance Products (ULIP)


Unit Linked Insurance Products give you insurance cover as well as investment. ULIPs invest some amount of your money in shares. You can decide which proportion of your fund should be invested in shares. ULIP has some positives but many negatives also.

Positives

  • ULIPs are very tax efficient. You can save tax from investment under 80C. While maturity amount would not be taxed also.

  • It forces you for regular saving.

  • You are forced to have some insurance cover if you don’t have one.

  • You can continuously change asset allocation


Negatives

  • You can’t withdraw your money before 5 years.

  • You remain under-insured because cover is only 10-20 times of the premium.

  • ULIPs are somewhat opaque. While Mutual funds are analysed and compared by many research agencies. less information is available about ULIPs.

  • Initially charges are higher than normal Mutual fund.

  • If there is under performance for long period you can’t switch another funds house. Maximum you can do is allocate more fund to another category. Suppose you chose equity option for building the wealth. But equity fund is under performing than the benchmark. Then you will not have the option to switch over to another equity fund. You can only switch to balanced or debt fund, Which might also give lesser return.


 

10- Health  Insurance


I do not need to remind you that Health is Wealth.  Best part is that it gives tax saving benefit also. The premium you pay for  health insurance is tax-deductible under Section 80(D). You can get tax saving up to 40,000 of expense in health insurance and health check up.

  • You can avail tax deduction on the expense of health insurance for you and family. Limit for tax deduction is 15,000.

  • You can additionally avail tax deduction for your parents health insurance. Limit is 20,000 for senior citizen and 15,000 for non senior citizen.

  • Health checkup for you and family is also tax free. The limit is 5,000 annually.


 

There are many other tax saving options as well. Life Insurance Endowment plans, pensions plans, RGESS and tax free infrastructure bonds. I have listed top 10 among these. I would like to also mention about most popular tax saving plan that is life insurance schemes. These Endowment schemes are one of worst tax saving option. It gives you below inflation return, high commission and less flexibility. One should avoid these, agents are pushing hard only to get hefty commission.

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