scorecardresearchIncome Tax: Last few days to invest in tax-saving instruments; Here's a checklist

Income Tax: Last few days to invest in tax-saving instruments; Here's a checklist

Updated: 29 Mar 2022, 03:35 PM IST
TL;DR.

In the run up to the financial year's end, tax payers can make investment in tax-saving instruments i.e., PPF, NPS, SSY, ELSS, among others

Some of the savings are made to avail deductions offered under section 80C to reduce their taxable income

Some of the savings are made to avail deductions offered under section 80C to reduce their taxable income

As the financial year is on the verge of ending, some (not all) tax payers must be scurrying around to make tax-saving investments. One can invest in a slew of schemes such as Public Provident Fund (PPF), National Pension System (NPS) and Sukanya Samridhi Yojana (SSY), Equity Linked Saving Scheme (ELSS), among others.

These savings are made to avail deductions offered under section 80C to reduce their taxable income. Some of these deductions also include EPF (employees provident fund), NSC (National Savings Certificate), repayment of housing loan's principal, post office time deposit and senior citizen saving scheme.

It vital to know that to be able to apply for these deductions, taxpayers must make investments on or before March 31. These deductions can be availed for an amount up to 1,50,000.

We give you the lowdown on some of these investments here:

 

Public Provident Fund: Primarily meant for small investors, minimum contribution for PPF account is 500. But as we know, statutory contribution must be made before March 31, 2022. In case minimum contribution is not made prior to the end of financial year, a penalty of Rs50 will be imposed yearly along with arrears for subscription.

When minimum contribution is not made, the account stands to get discontinued. However, it can be revived prior to the maturity date.

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National Pension System (NPS): It is a government-run market-linked pension savings vehicle. Just as mutual funds, NPS is reliant on the success of pension fund management and the market.

Introduced by the central government in 2004, it is one of the most preferred retirement saving options among investors. It is a social security initiative that benefits public as well as private-sector employees. Earlier it was open for only PSU employees but in 2009, the central government opened this scheme for private as well as unorganized sectors.

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Under this scheme, you allocate a certain amount of your income towards NPS on a regular basis and at maturity, which is when you reach the age of 60, you can withdraw 40 percent of your total accumulated fund. The remaining 60 percent gets credited to your account on a monthly basis in the form of a pension.

Sukanya Samridhi Yojana: The minimum deposit for SSY is 250 while the maximum is 1.5 lakh. The account can be opened in the name of a girl child but before she attains the age of 10. Needless to mention that only one account can be opened in the name of a girl child. The SSY account can be opened in post officers and in authorised banks.

The withdrawal from this account is allowed for the purpose of higher education of account holder to meet education expenses. The account can be closed prematurely in case girl is getting married after she attains the age of 18. The account can be transferred anywhere from one post office/ bank to another.

The account shall mature on completion of a period of 21 years from the date of opening of account. Interest earned in the account is free from Income Tax under Section 10 of I-T Act.

Equity Linked Saving Scheme: An ELSS is a mutual fund scheme that bears market-linked returns from equities and equity-oriented securities. It is a tax-saving scheme for individuals who are looking for an investment option.

With the lock-in requirement of only three years, it has a short lock-in periods when compared to the conventional saving instruments.

Investing in ELSS is quite similar to investing in any mutual fund scheme. One can start with a minimum amount ofRs500 and there is no upper limit on investment.

So, one can invest in any of the above-mentioned saving schemes, among others, and save tax under section 80C at the same time.

First Published: 29 Mar 2022, 03:05 PM IST