HOW TO SAVE TAX IN FINANCIAL YEAR 2020-21
Top 10 tax savings investment plan.
Tex benefit under section 80C and highest returns
1.ELSS FUND(EQUITY LINKED SAVING SCHEME)- Also called Tax saving Mutual fund Return 13.18% for last 3 years, potential of high returns, flexibility and ease of investment keep ELSS at the top.
ELSS fund continue to rule the root in the section 80C basket. And for good reason too.these fund have generated the highest returns among all tax saving instrument they also have the shortest lock in of three years. Gain up to 1 lakh are tax free and regular harvesting of gain can help investment avoid tax on long term capital gain. Investing is very easy as all fund house now offer the online investing facility.
2.NPS(NATIONAL PENSION SYSTEM OR NEW PENSION SCHEME).Returns 9.33 for past 5 years (Government scheme) for employees under state and central government(Compulsory) for private employees(optional)
New rule, additional tax benefit and flexibility have made NPS very attractive.
3 types of deduction benefit
80CCD(1)-Employee contribution(10% of Basic Salary+DA) upto 1.5 lakh in a financial year under sec.80C
80CCD(2)-Employer contribution(14% of Basic salary+DA) apart from sec. 80C
80CCD(1B)- Additional deduction up to 50000 apart from sec.80C,
TOTAL deduction under NPS up to 2 lakh
3.Ulip-(Unity linked insurance plan) Return 8.09% for past 3 years.Ulip have risen in the ranking due to low costs, tax free returns and flexibility
4.PPF(Public provident Fund)-Interest 7.9% for Jan-March 2020
Return are assured and tax free.No tax during investment/deposit and during holding and during withdrawal(EEE). lock-in period 15 year.
5.SCSS(Senior Citizens Saving Scheme ) for Age above 60 years Interest 8.6% for Jan-March 2020. Best option for retires score low in the ranking due to its limited scope
The senior citizen saving scheme offers assured returns and regular income to investors. Backed by the government, the scheme score high on safety and liquidity, the interest is paid every quarter, like the ppf, five years lock-in period
6.NSC(National Saving Certificate)-Interest 7.9% for jan-march
NSC used to very popular offer assured returns and interest rate does not change once you invest.
7.SSY(Sukanya Samriddhi Yojana)-interest 8.4% for Jan-March 2020
This is a great way to save for your daughter. But the scheme opened only for girls below the age of 10 year.linked to government bond
8.TAX SAVING FDs-Interest 6.5-7.6%
Interest rates are very low and tax reduce the returns further. The post tax returns in the 30% Tax bracelet is barely 5%.however tax saving bank deposit are a good choice for investors who left there tax planning for the last minute. If someone has to show proof of investment last movement or end of financial year
9.Pension plans-Return 7.5-9% for past 3 years
The tax benefits offered by the NPS and healthy returns generated have pushed pension plan from insurance companies in to the back ground. Insurance want that these plan should also get an additional dedication of 50000 under sec.80CCD(1b)
10-life insurance-Return 4.5-5% for 20 Year plan
This safe and secure option remain at the bottom due to poor returns, high cost
Life insurance helps protects all other goals of the individual. How9this purpose is better served by a low cost pure protection term plan than by a traditional endowment policy or a mony back plan. These plan have very high premium and offer very low returns. This is also by far the worst way to save tax.
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