Tax saving schemes
Everyone who pays tax or comes under the tax section wants that their tax amount should be used in such a way that an income could be generated from it, but before choosing the right tax schemes there are some factors which should be kept in mind like safety, liquidity and returns.
Here are few tax savers that not only help you save tax but also helps in earning tax free income.
- Equity linked saving schemes- Equity linked saving schemes (ELSS) are diversified equity mutual funds with two differentiating feature -one, investment amount in them qualifies for tax benefit under section 80C of the Income Tax Act 1961, upto limit of 1.5lakh a year and secondly, the amount invested has a lock-in period of 3 years. The returns on ELSS are not fixed and neither assured but is dependent on the performance of equity markets. ELSS not only helps you save tax and generate tax exempt income.
- Public Provident fund-fund- Since 1968 Public Provident fund has been a favorite saving avenue for several investors and still standing tall, after all the principal and the interest earned have a sovereign gaurantee and the returns are tax free. Currently it's offering 8 percent per annum. Someone paying 31.2 percent tax, it translates to nearly 11.62 percent taxable returns. It's easy to open a PFF account in one's own name or on behalf of a minor of whom he is guardian. While minimum amount required to keep active is RS.500, the maximum amount that can be deposited in a financial year is RS. 1.5lakh.
- Employees' Provident funds- It is another avenue that helps a salaried individual not only helps tax saving but also accumulate tax free corpus. A employee contribute 12 percent of one's basic salary each month mandatory towards his EPF account. However one could increase his own contribution upto 100 percent bof basic and DA, to his VPF account and in doing so it becomes voluntary Provident fund.
- Unit linked insurance plan- Unit linked insurance plan (ulip) is a hybrid product, a combo protection and saving. It not only provide life insurance but also helps in channel one's saving into various market linked assests for meeting long term goals.