Tax Saving Investments: Make the Most

Written on Tuesday, December 1, 2015
By Team Bajaj Capital

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With just a few months to go for the financial year to end, it is time to make the most of tax saving investments. Thanks to the 2015 budget, this year there are options to save a little more by investing in instruments under section 80C, 80D and 80 CCD.


A section that most of us are familiar with, a deduction of up to Rs. 1,50,000 is now allowed from taxable income (against the previous limit of Rs. 1 lakh) in respect of investments made in specified schemes under section 80C. The instruments that qualify under this section include ELSS (Equity Linked Saving Scheme), life insurance premiums, NSC (National Saving Certificates), ULIPs, tax saving FDs from banks, contribution to EPF/GPF, and contribution to Public Provident Fund, post office schemes, rural development bonds of NABARD, pension scheme of LIC of India or any other insurance company and housing loan principal repaid.


Medical costs are rising faster than inflation and therefore, why not up your health cover? Given current medical expenses currently, one needs a minimum sum assured of Rs. 5 lakh. In case you have dependent family members, a Rs. 10 lakh cover would be good. You can save on your tax outgo too, this way! Under section 80D, the annual deduction allowed towards medical insurance premium has been increased from Rs. 15000 to Rs. 25,000 in the 2015 budget. This means that, by paying additional premium of Rs. 10000, you can save as much as Rs. 3000 if you are in the 30 per cent tax bracket. Others can save Rs. 1000- Rs. 2000.


Apart from the above, you can save tax on the investment made towards pension, under Section 80 CCD of the Income Tax Act. If one contributes to the National Pension Saving Scheme(NPS) administered and regulated by the Pension Fund Regulatory and Development Authority (PFRDA) a sizeable additional deduction of Rs. 50,000 is now allowed from your income. This is over and above the Rs. 1.5 lakh a year allowed for investments under section 80C. For someone in highest tax bracket, maximizing his investment in NPS could additionally save about Rs. 15,000 a year in taxes.


Besides the NPS, some mutual funds and insurance companies also offer pension plans or retirement plans which are not under the jurisdiction of PFRDA. Apart from this, other retirement schemes include EPF, Retirement gratuity that is offered by employers to their employees. PPF can also be used to accumulate a corpus for retirement.


To sum up, an investor in the 30 per cent tax bracket can save up to Rs. 69,525 by investing in various tax saving instruments.


This article was originally published in Hindu Business Line.

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