Sunday, December 25, 2011

Tax Saving Using One time Investment Plan

Its time for financial year end and all are seriously looking for investments to save tax. As per income tax policy, we have a exemption for 1 lakh investment under 80C. What all this 80C contains is a question which many ask me. Also they want to know the best plan to invest in, another group of friends ask for plans which are single time payment, because they do not want to commit to certain amount every year :) 


First  and foremost, this 1 Lakh covers Provident Fund(PF), so it is enough if you invest only the remaining amount. You can also pay the remaining amount to PF voluntarily. Here is some of investment plans which are considered under 80C and one time payment.

National Savings Certificate (Indian Post Office) - 100% guaranteed minimum returns of 8%, for every Rs.100, you will get Rs.161 on the 7th year. The interest returned on the 7th year will be taxable.
Equity Linked Savings Scheme (ELSS - Market based) - Returns are not guaranteed in this scheme, this is like investing in share market, lock in period is 3 years. The returns are purely based on market performance.
5yr Fixed Deposit - 100% guaranteed minimum returns, Interest % varies between banks. This is simple FD, but the lock period is 5 years.
LIC Bima Bachat - This is from LIC, and it covers life insurance for us. the returns are minimal, because it covers life insurance. Lock period varies and starts from 9,12,15 years. To be simple, for a sum assured amount, and the age of person insured, LIC calculates a single time premium. After every 3yrs completion, 15% of the insured amount will be returned. On maturity sum assured will be returned with loyalty bonus, if any. Note the word "if any", which is based on LIC profit performance. There are many such single premium insurance plans announced by private sectors, but I have discussed about LIC plan alone here.

Happy Investing and Saving Tax.

 
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