Hydeabad: Individuals are subject to tax on income over and above their taxable income. The year in which income is earned is called the previous year and the year in which the income is charged to tax is called assessment year.
The rising inflation keeps eroding the purchasing power. There it is necessary to carefully plan the finances in a manner that will help fulfil the financial needs at at all stages of life. We will look at the options available for women and senior citizens Under Section 80C, investment in PPF, employee’s share of PF contribution, national savings certificates, ULIPs, and equity linked saving schemes, children’s tuition fee, principal repayment of home loan, investment in Sukanya Samridhi Account, five year deposit schemes, subscription to notified securities, contribution to notified pension fund set up by mutual fund, home loan account scheme of the National Housing Bank, deposit scheme of a public sector engaged in providing housing finance, notified annuity plan of LIC, and notified bonds of Nabard are covered. The limit in this case is Rs 1,50,000.
According to Ramani, Head, Product and Innovation, Policybazaar.com, though insurance is a protection instrument and must never be a priority for tax saving purpose, it does provide the merit of exemption from tax under Section 80C and 10(10D) in life insurance and under 80D in health insurance.
Also, ULIPs, which are the favoured investment plan amongst the young generation, also provide an exemption from tax under Section 80C. With almost no premium allocation charges and policy administration charges, ULIPs are a low-cost investment product. Also, the fund management charges are capped at 1.35 per cent by IRDAI and they range between 1-1.35% in every product. A part of your investment goes into life insurance and the other chunk is invested in the market to gain maximum benefits with features like free switching between funds, waiver of premium on death, income benefit, loyalty additions, said Ramani.
Public Provident Fund is a popular and trusted long-term investment and tax-saving scheme. The interest rate on PPF is determined by the government and has a lock-in period of 15 years, thus providing tax-free benefits to the investor. The other options are an investment in market-linked products which comes with their own risk but also generate good returns.
Health insurance comes handy at an old age as it covers the hospitalisation costs and saving you from digging your life-long savings. The Union Budget 2018, motivated senior citizens to invest in these plans by increasing the deduction limit under 80D for senior citizens from Rs. 30,000 to a maximum of Rs.50,000. Along with that, if a senior citizen is paying for their even more senior citizen parent’s insurance then they can get an additional exemption of Rs. 50,000. If the senior citizen is suffering from critical illnesses like hemophilia, malignant cancer or chronic renal failure, then they can claim from 60,000 to 1 lakh exemption under section 80DDB.
Senior Citizens Saving Scheme is by far among the most favorable saving schemes for citizens in or above the ’60s. This scheme is available in banks and post-offices and the interest is 8.3% per annum currently and the amount is tax-deductible under section 80C but the interest earned on it taxable. This type of account has a 5-years tenure and can be extended to 3 more years upon maturity and the amount that can be deposited cannot be more than 15 lakhs but can have more than one account, said Ramani.