Best Tax Saving Schemes in India for 2012

best tax saving investments in india 2012, best tax saving tips, best tax saving investments

Best Tax Saving Schemes in India for 2012

There are various tax saving schemes in India which can be invested for 2012 and get the highest returns. Investing in best investment options is key to grow the hard earned money. There are various investment categories under which we get tax exemption under Section 80C of Income Tax Act, 1956 in India.

Quick list of tax saving investments categories

  1. Equity linked saving schemes
  2. Fixed deposit
  3. Infra bonds
  4. Life insurance
  5. NSC
  6. PPF
  7. ULIP

Various tax saving schemes in India for 2012

Equity tax saving mutual funds /Equity linked saving schemes are the investment plans where an investor get tax rebates. Below are the top equity tax saving mutual funds based on the performance of 3 years returns.

best tax saving schemes-mutual funds

Tax saving Bank Fixed deposits: Tax saving fixed deposits are available for the period of 5+ years. One can invest upto Rs 1 lakh in these Tax saving fixed deposits to avail tax benefits. Below are the top tax saving bank fixed deposits available currently.

best tax saver bank FD's

 

Infrastructure Bonds: These are the various companies who issue infrastructure bonds for taxing saving purpose. These bonds are issued typically during Jan to Mar period to attract the tax payers who look for tax saving investments during that time.

Life insurance: We know that the premium paid for life insurance is exempted from tax. An investor should not be confused with investment Vs life insurance. We would cover separate post on choosing the best life insurance policies with lesser premiums.

National Savings Certificates (NSC): Below are the features of NSC.

  • NSC VIII Issue (5 year) – Interest rate of 8.6% p.a
  • NSC IX Issue (10 year) – Interest rate of 8.9% p.a.
  • Min investment Rs 100. No max.limit.
  • No TDS
  • Investment up to Rs 1,00,000 p.a. qualifies for Income Tax Rebate

 Public Provident Fund (PPF) : Below are the features of investments in PPF.

  • Interest rate of 8.8% p.a.
  • Min. deposit is 500/- p.a.. Max Rs 1,00,000/- p.a.
  • Duration 15 years
  • Investment up to Rs 1,00,000/- p.a. qualifies for Income Tax
  • Interest is tax-free.
  • Deposits can be made in lumpsum or in 12 installments but minimum of Rs 500 is mandatory in each financial year
  • Withdrawal is available from 6th year

Unit linked insurance plan: Under unit linked insurance plans, part of the insurance premium would be invested in equity stock markets by the insurance companies, so that an insurer gets higher returnrs at the maturity time. This is due to the fact that investments in stock markets for long term was always appreciated with excellent returns. One of the schemes floated by Life insurance corporate ltd was money plus some time back and some of the insurance agents indicated that the amount would be grown 20 times in 20 years for insurance premium paid . This was based on the indication that stock markets have grown 15% annually in the last 10 to 15 years and this was a real fact.

Conclusion: The above are only the tax saving tips. Thought there are various best tax saving schemes in India, choose a tax saving investment which matches your requirement. Your requirement should clearly state the period of investment for which you can hold them.

Readers, are you investing in these best tax saving schemes in india ? What other tax saving investment schemes are you investing? Please give your comments

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Suresh

Myinvestmentideas.com

The Author

Suresh KP

Suresh KP i.e. me have written 1,800+ articles on this blog. I have done by B.Com from Osmania University and then MBA-Finance from Symbiosis University, Pune. I have over 20 years of experience in analyzing various investment options and money saving ideas. I love doing financial planning, Mutual Fund Analysis, Searching long term Stocks for wealth creation, IPOs, reviewing Insurance Products, analysing Health insurance Plans etc.

11 Comments

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  1. Hi suresh, nice replies and helpfull to one who dont know how to save tax from salary Income.

    In my case I am private employee and my wife is c.govt employee. she has been paying I.T through department. we are planning to buy a flat, is the emi going to pay for the flat can be exempted fully?

    how much emi is under exemption.  can you please advise

    thank you,

    p c balaji

    1. Hi Balaji, EMI contains principal payment + interest. Principal can be exempted up to Rs 1 Lakh which is part of 80C (which is max of 1 Lakh which includes insurance, NSC etc.). Coming to Interest, an amount of Rs 1.5 Lakhs is exempted from tax. e.g. your EMI is Rs 10,000 per month which contains Rs 2,000 principal and Rs 8,000 interest. You can claim exemption of Rs 24,000 (Rs 2,000 x 12 moths) u/s 80C and Rs 96,000 (Rs 8,000 x 12 months). Generally when you take loan, more than 95% is interest and small amount is principal. As years go long, principal would increase and interest would reduce.

  2.   Sir,

       Out of PPF, NSC and LIC Jeevan Sugam which one is a better 80C investment choice. Please rank these schemes and suggest any other scheme in this regard. In ELSS whic one is good option.

    regards

    Sudhir Jain

    1. Sudhir, you are mixing up investment and insurance, but still let us see how they can be rated. 1) PPF-8.5% to 9% (would get revised every year) interest rate -15 years lock-in period; 2 ) NSC-8.15% interest rate (approx)-5 years / 10 years lock in period 3) LIC Jeevan sugam-Lock-in period 10 years-< 6% returns. Question is which one to choose 1) If you are looking for higher returns for long term, you should go for PPF. 2) If you are just looking for 80C investments, you can go for NSC (only 5 years lock in period). 3) If you are looking for 80C investments along with insurance protection, you should go fro Jeevan Sugam

  3. Sir,

               Thanks for the prompt reply and clarification. Although you have removed my doubt but to be doubly sure I  request you to specifically clarify weather I can deposit more than once in a month in my PPF account with PNB in case I have not exhausted the total of 12 installments limit in a financial year. I have already deposited one installment in March 2013 and want to deposit more in this account in this month. I shall be grateful for this particular clarification from you. Hoping for an early reply.

    regards

    Sudhir Jain

       

    1. Yes Sudhir, your understanding is correct.

  4. Sir,

              Please clarify weather limt of 12 installments in a single year for PPF account means one installment per month or any number of installments in a month subject to total of 12 installments in a financial year.

    Sudhir Jain

    1. Hi Sudhir, It is not necessary to deposit subscription in every month of the year. The subscriptions can be deposited in lumpsum or in convenient installment of not more than 12 installments.

  5. Investors are increasingly forced to choose from a proliferation of investment options and they also have to deal with contradictory advice. So it is better to hire some good financial advisers.

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