scorecardresearchIncome Tax Filing: Invest in tax saving schemes before March 31 to save tax

Income Tax Filing: Invest in tax saving schemes before March 31 to save tax

Updated: 09 Mar 2022, 03:30 PM IST
TL;DR.

If you have already invested in PPF, NPS, ELSS, SSY, make sure to make a minimum contribution before 31st March to keep your account active

Several investment schemes require depositors to make regular contributions so that these schemes remain operative

Several investment schemes require depositors to make regular contributions so that these schemes remain operative

If you already have a NPS or PPF account, it is vital to make a minimum contribution before the end of the financial year to let the policies continue. 

Several tax saving schemes require depositors to make regular contributions so that these schemes remain operative. Under section 80C of income tax, investors can claim an exemption of up to 1,50,000 for contributions they make towards PPF, NPS, SSY and several such schemes including LIC premium, equity linked saving scheme (ELSS), principal payment towards home loan, stamp duty for purchase of property, national saving certificate, ULIP and others.

It is important to note that an individual can choose either the old tax regime wherein s/he can avail these tax exemptions. Alternatively, one can also choose the new tax regime to pay tax at lower rates by forgoing tax exemptions. 

Let us understand what this means. Those in the income tax slab of 5 lakh - 7.5 lakh, for instance, can pay tax at the rate of 10 percent instead of 20 and forego their right of exemption at the same time. Similarly, tax payers who fall in the slab of 7.5 lakh to 10 lakh can choose a lower slab of 15 percent instead of 10 percent by letting go of exemptions. 

Likewise, the tax payers who are in the tax bracket of 10 to 12.5 lakh can choose a lower tax rate of 20 percent instead of 30 that was applicable in the old regime.

However, one must understand that even if one chooses the new tax regime, one is supposed to make a minimum contribution needed to keep these investment schemes operative.

Here we describe some of the schemes where depositors are meant to make a minimum contribution before the financial year’s closure:

Public Provident Fund (PPF): The minimum contribution for PPF account is 500 and one can make statutory contribution before March 31, 2022. However, if minimum contribution is not made then a penalty of 50 will be imposed each year along with arrears for subscription. 

Needless to mention that when minimum contribution is not made, the account will get discontinued. But it can be revived before the end of its maturity date.

National Pension system (NPS): There is a requirement to deposit a minimum of 1,000 every year in the tier one account of NPS to keep the account operative.

However, in case the contribution is not made to the Tier-1 account, then the account would get dormant. In case subscriber wants to revive the dormant account then s/he has to pay a penalty of 100 each year along with minimum contribution. It is important to note that if a subscriber has a tier -II account then along with tier 1, the tier II also stand to get frozen.

Sukanya Samriddhi Yojana (SSY): It is mandatory to make a minimum deposit of 250 every financial year to keep the Sukanya Samriddhi Yojana (SSY) account operative.

And in case you happened to give it a pass, it would be treated as a default. But it can still be revived within a span of 15 years from the start of the account. To be able to do that, you need to pay a contribution of 250, plus a penalty of 50 penalty for each year of default.

So, it is imperative that you make your contribution towards these investment schemes as soon as possible, at least before the end of the financial year.

First Published: 09 Mar 2022, 03:30 PM IST