Tax Saving Investment Avenues

November 8th, 2009  | Published in Income Tax, Investment








Public Provident Funds: The PPF scheme offers assured returns and tax benefits under Section 80C of the IT Act. Minimum investments of Rs 500 and a maximum of Rs 70,000 annually are entitled to tax benefits under Section 80C. The lock-in period is 15 years with withdrawals allowed only after the 5th year.

Rate of Interest: 8 percent p.a.; tax-free

Employee Provident Fund (EPF): An employee contributes a certain percentage of his/her salary which is matched by the employer. The minimum rate of contribution is 12 percent of basic salary which has to be matched by an equal contribution from the employer. The EPF investments are also entitled to tax benefits under Section 80C.

Rate of Interest: 8.5 percent p.a.

National Savings Certificate (NSC): The NSC scheme offers assured returns of 8 percent compounded half yearly. The minimum investment is Rs 00 annually and there is no maximum limit. There is a lock-in period of 6 years. Investments up to Rs 1 lakh are entitled to tax benefits under Section 80C.

Rate of Interest: 8 percent compounded half yearly.
Interest Income is taxable upon maturity.
Lock-in period: 6 years

Fixed deposits with scheduled banks: Fixed deposits with a tenure of 5 years opened with a scheduled bank is entitled to tax benefits. An FD for a minimum amount of Rs 100 up to a maximum amount of Rs 1 lakh is entitled for tax benefits under Section 80C.

Rate of Interest: Variable (Currently around 8)
Interest income is taxable
Lock-in period: 5 years

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