From tax-saving schemes and retirement plans by MFs to public provident fund (PPF), five-year bank FDs to insurance policies, they could invest in or buy one or more of these products to lessen their tax burdens, advisers said.
Under Section 80C of the Income Tax Act, a taxpayer is allowed to invest in some financial assets, buy financial products or spend money under select heads to claim a tax rebate every year. These also include National Saving Certificate with post offices, National Pension Scheme (NPS) of the government, interest paid on housing loans and expenses incurred for children’s education.
In addition to these, senior citizens have the option to invest in senior citizen saving schemes (SCSS) at banks and post offices.
One could also claim tax benefits under mediclaim policies and an additional Rs 50,000 put in NPS under different sections of the Act. However, given the time constraints to complete the formalities to invest in or buy these investment products, not all are now available to taxpayers.
According to the government, money in PPF accounts currently earns 7.1% annually and 7.4% in SCSS. On the other hand, investments in MF products and unit-linked policies of insurance companies earn market-driven returns.
Fund distributors and investment advisers, however, say that it’s not the right thing to always wait for the last few days to invest in tax-saving options or buy insurance products. In such situations, the chance of making a mistake in haste increases.
“One should start to plan tax-related investments from April onwards and not wait till the end of the financial year,” said Dharmendra Mehta of DP Wealthzone, a Gujarat-based certified MF distributor. “This should be started at the beginning of the year and carried through the year,” he said.
According to a Kolkata-based investment adviser, people should be careful about the financial products they invest in and the products they buy. For example, for insurance products that allow one-time premium payment, only 10% of the premium amount could be claimed under 80C. Also, only some select retirement plans by MFs are approved investments under this section.
more recommended stories
SUV sales: SUVs beat Covid blues, sales grow 12% in FY21
NEW DELHI: SUVs rolled over Covid’s.
Furlough: How can you report furlough fraud? Is it anonymous? | Personal Finance | Finance
As well as investigating furlough claims.
Indirect tax collections: Centre’s indirect tax collections rise over 12% in FY21
NEW DELHI: The Centre’s net revenue.
Universal Credit Test & Trace support claimants may face new quarantine compliance service | Personal Finance | Finance
Universal Credit and other benefit claimants.