29-03-2014, 02:50 PM
Investments in Tax Saving Products – an Overview
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Bank Fixed Deposits
In a bank fixed deposit saving plan, a specific amount of money is invested in the bank for a certain period of time by allotting a static rate of Interest. The minimum investment in most of the banks is ` 100. At present the rate of interest in most of the banks is between 8%-10%.
Benefits under Bank Fixed Deposits:
The investment in bank fixed deposit saving plan is tax free under section 80L up to a limit of ` 12,000.
The deposits will be secure as they are indemnified under the Deposit Insurance & Credit Guarantee Scheme of India.
The investor can apply for loans upto 75%-95% of the amount deposited under the bank fixed deposit against the receipts of the fixed deposits
Bank Fixed deposits are best to opt for if you want to invest your money for an extended period of time besides getting high returns.
Public Provident Fund (PPF)
Public Provident Fund (PPF) is supported by the government and is generally safe with comparatively high returns. The minimum limit of investment in PPF is ` 500 and the maximum is upto ` 70,000 per annum. At present PPF is compounded at an annual interest of 8%.
Benefits under Public Provident Fund (PPF):
The investor enjoys the rebate on his investment under section 80C of I.T. Act 1961
Interest income on PPF and the final amount is considered as tax free
Investments in small amounts can be made every year for a longer duration
Investments are fixed deposited for 15 years
Balance amount held in Public Provident Fund is tax exempted from wealth tax
Infrastructure Bonds
An investor can save on taxes by investing in Infrastructure Bonds as mentioned under Section 88 of the Income Tax Act, 1961. The maximum investment is ` 1, 00,000 and the minimum limit is 30,000. The investments will be fixed deposited for 3 years and the interest will be compounded on 5% to 6% or 8.7% to 11.71%, if the tax break is considered.
Benefits under Infrastructure Bonds:
Investments in infrastructure bonds from different banks are eligible for a rebate under Section 88 of the Income Tax Act.
However, the interest will be chargeable; the investor can assert tax exemptions against ` 15,000 under Section 80L.
Life Insurance Schemes
While applying for Life Insurance plans look for schemes which not only provide high returns but also maximize your insurance policy. The maximum and minimum limit of investment, it lock-in period and returns depends on the terms and conditions of the cover. To qualify for rebate under Section 88, the total premium amount should be within ` 70,000