It is that time of the year when your employer will ask for your investment declarations. Most salaried persons will want to invest in tax saving instruments.
Among instruments you cannot do without, is Public Provident Fund (PPF) which offers tax-free eight per cent annual returns with no risk, making it a good fit in most portfolios. However, a person can invest maximum of Rs 70,000 each year in PPF.
For people in higher income brackets (basic salary of over Rs 8.3 lakh), the employee provident fund (EPF) itself covers the permissible limit of savings, thus investment in other instruments is not necessary. Other than EPF and PPF, a person needs to look at risk-return parameters of each product that helps him or her save tax.
SECTION 80C
- Equity Linked Savings Scheme (ELSS)
- Unit-linked Life insurance plans (Ulips)
- Other Life insurance plans
- New Pension Scheme (NPS)
- Pension Plans
- National Savings Certificate
- Senior Citizen Savings Scheme,
- 5-year Fixed Deposits, including accrued interest,
- Tuition fee for two children for full time courses,
- Home loan principal repayment.
The combined limit of deductions under Section 80C, 80CCC and 80CCD is Rs 1 lakh.
OTHER INSTRUMENTS
- Interest on home loans
- Infrastructure Bonds
- Health Insurance
Section 80G provides for deduction of 50 per cent or 100 per cent of the amount donated.
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