Have you utilised all the legal provisions to save tax? We will help you understand tax in easiest possible way to save on your income tax payment.
Tax Saving Through Investment
It never makes sense to spend on something just to save tax. There are several investment option that come with tax benefits. Following Investments help you save tax under section 80C:
- PPF
- NSC
- Tax Saving FD
- LIC Premium
| Investment | Returns | Lock-In | Risk |
| ELSS Funds | 12-15% | 3 years | Moderate |
| NSC | 8% | 5 years | Low |
| FD | 7-9% | 5 years | Low |
| PPF | 8% | 15 years | Low |
| NPS | 8-10% | Till Retirement | Moderate |
You can save upto Rs. 1,50,000 (aggregate of 80C, 80CCC and 80CCD) through these investments. Let get into details of each one
Tax Saving Through PPF (Public Provident Fund):
PPF provides you an interest rate of 8%. The total amount received upon maturity and the interest earned is both exempted from income tax. Contributions to the PPF accounts of the spouse and children are also eligible for tax deduction.
It is more for a long term investment of 15 years. Loans can be availed between the 3rd to the 6th financial year. Partial withdrawal facility can be availed from the 7th financial year onwards.
Premature closure of a PPF account is allowed only after the completion of 5 years, for the purpose of medical treatment of family members, and for the higher education of only the PPF account holder. The premature closure comes with an interest rate penalty of 1%.
Tax Saving Through NSC (National Saving Certificate)
NSC provides you an interest rate of 7.6%. Currently, the rate of interest is 8% for the quarter 1 October 2018 to 31 December 2018 (annually) prior to which the rate of interest stood at 7.6% – the government revises this rate every quarter.
You can purchase this scheme from any post office. You can choose between maturity period of 5 or 10 years. It is possible to use NSC as collateral for loans from banks. Interest gets compounded and reinvested by default. Upon maturity, you will receive the entire maturity value. Since there is no TDS on NSC payouts, the subscriber should pay the applicable tax on it.
Generally you cannot do a premature closure of NSC.