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| Taxing time: Count on rebates |
| Tinesh Bhasin / Mumbai Feb 17, 2009, 00:20 IST |
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Towards the end of every financial year, taxpayers scramble to meet their investment requirements under different sections of the Income Tax Act. And the end result, almost always, is a lot of confusion.
For those who have not yet made the requisite investments, here are some options to invest Rs 1 lakh under Section 80C. Read on to avoid the last-minute confusion:
EQUITY-LINKED SAVING SCHEME (ELSS): Investment in an ELSS should not be in lump sum. Instead, opt for systematic investment plan (SIP). “Once should also look at schemes that provide free insurance,” said Mukesh Dedhia, Director, Galla & Bhansali. For instance, Birla Sun Life Tax Relief and HSBC Tax Saver Equity offer free critical illness cover, and DWS Tax Saving provides free life insurance.
BANK FIXED DEPOSIT (FD): Investment in FDs for a minimum period of five years is exempted from tax.
PUBLIC PROVIDENT FUND (PPF): It is a 15-year investment, which carries a tax-free interest rate of 8 per cent as of now. In PPF, the interest is paid on the 5th of every month. There is an investment cap of Rs 70,000 a year.
LIFE INSURANCE: While buying a life insurance cover, keep the primary objective as risk protection and not investment. Avoid unit-linked insurance products (Ulips) and endowment plans. “These are investment plans. Investors should never mix insurance with investments,” said Kartik Jhaveri, a certified financial planner.
CHILDREN'S TUITION FEES: Parents can also claim deduction on tuition fees for a maximum of two children within the overall limit of Rs 1 lakh. The payment towards any development fees or donation to institutions is excluded.
HOME LOAN PRINCIPAL: The principal repayment in a year up to Rs 1 lakh qualifies for deduction. Also, any part-payment made towards repayment of your home loan too receives the same benefit.
PENSION PLAN: The premium paid towards pension plan can also be claimed for deduction under Section 80CCC.
Income tax rebate can also be claimed under some other sections. That is, for a self-occupied house, home loan interest payout up to Rs 1.5 lakh a year gets deduction under Section 24. But if the house is rented, the entire interest payout can be deducted. “But if you claim house rent allowance in a city where you have a second house, there is high probability of your claim for tax benefit on interest payout getting rejected,” said K H Viswanathan, Executive Director, Astute Consulting & Business Services.
Under Section 80D, premiums paid on any health-related insurance plan are deductible. If you are paying premium for self, family and parents (not senior citizens), the deductible amount is Rs 30,000. In case of senior citizens, the amount is 35,000. The tax benefit is not allowed if the premiums are paid in cash.
Educational loan for higher studies for spouse and children too is eligible for deductions under Section 80E. There is no upper limit for this deduction.
While you might be late, do not make hasty decisions. “Invest in instruments that match your future money requirement. Also, keep your liabilities in mind,” said Viswanathan.
Finally, remember to keep copies of all the documents that you give to the employer as declaration proof. These will come in handy when you file for income tax returns.
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