Investment plans to Save Income Tax under Section 80C

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Konquerror

Konquerror

Forerunner
Hi Guys,

March is near by and I haven't done any investment to save Income Tax under Section 80C. Can you guys please guide me regarding some good and beneficial plans like LIC/Mutual Funds/FD etc etc.

Thanks!
 
TechHead said:
70k in PPF. 8% interest tax free blindly.
You can put the remainder into a good tax saving MF.
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Well I'm a newbie here...would be paying income tax to GOI for first time...can you explain what do you mean by PPF and how 8% is coming in picture?
 
I've not used MF's but most banks have tax saver FD's, the limit is a lakh per year. Be ready to provide photopy of your pan card with it.

Yes, the payout is little lower but there's no subject to market risk clause :)
 
@Konquerror: See it entirely depends on the amount you have to save/invest this year.. PPF/MF are the two good choices but then there are other considerations as well.

@blr_p: FD's would have been a good option if the lock-in was just 3 yrs. But 5 yr lock-in just too much IMO.. I certainly recommend to avoid this investment option, unless you can keep the money locked for 5 yrs.

Ideally tax planning should done from the beginning of the financial year, for the first time I planned investments and savings from Apr, 09 and at this point of time I don't need to think about, where how much and how to save/invest.
 
Konquerror said:
Well I'm a newbie here...would be paying income tax to GOI for first time...can you explain what do you mean by PPF and how 8% is coming in picture?
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You must already be aware that you can save up to 1 Lac under 80C and get the amount exempted from tax right?

You would also be aware that your company deducted some amount (12% of basic) towards PF (Provident fund) every month. This amount gets exempted from tax under 80C. Similarly you can open a PPF (Public Provident Fund) account and invest up to 70k per year in this. The interest is calculated at 8% and the best thing is the interest earned is tax free. With many other investment schemes, you have to pay taxes when the amount matures. So many people prefer to invest in PPF. You can read up more about PPF here

Public Provident Fund (PPF) scheme : Investment Limit, Income tax benefit, Features |Tax Guru : Complete Tax Solution

Between PF and PPF, you can cover most of the 80C exemption limit of 1 Lac. If your anual PF comes to less than 30k and assuming you invest 70k in PPF, you can cover the rest of the amount under an insurance policy or MF.
 
setuniket said:
@blr_p: FD's would have been a good option if the lock-in was just 3 yrs. But 5 yr lock-in just too much IMO.. I certainly recommend to avoid this investment option, unless you can keep the money locked for 5 yrs.
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What do you recommend instead ?
 
i've PM'd u one guys no..he'll explain u everything and help u with whatever u want free of charge..
just FYI am using their services since 3 yrs, not at all disappointed with them, i think there website is peakalpha.com

i for one, have invested in MF rather than PPF cos, its easier to track on whats happening, also, since the recession is just ending, ur return on investment should be quite high when compared to ppf/lic insurance.

mine infact almost doubled in the last 3 yrs.
 
Along with all these investment, also try to put in some money into "Term Insurance".

Take the life cover which is about 40 times your yearly income. Try to take it from LIC or SBI Life.

By the way always remember Insurance != investment.

Take any investment product which provides insurance with a kg of salt!!

And yeah...open up a PPF account in SBI or select post offices and try to put in 70k into it every year. Returns are at 8% compounded annually and tax free.

Regards,

Mohit
 
blr_p said:
What do you recommend instead ?
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Mutual Fund. I know this opinion is strange(and to an extent stupid), as I am asking one to invest in Equity against Debt. But this is simply because I have been investing in equity based funds since last 15 years or more and in every instance I have got healthy returns overall. 3yr lock means fund manager plans and invests accordingly.

Of course investing in MF's, PPF, Life Insurance is the way to go.
 
Great thread here. I'm not as seasoned as some of the other guys here so this thread will help immensely.
 
blr_p said:
What do you recommend instead ?
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Problem with Tax saving FDs is not the 5 years lock in(according to me)..if u can wait for 3 years in ELSS than 2 years more in FD wont be a big deal...though principal assured and a bit extra % interest in FD(than regular FDs) but what people forget to judge is this interest also counts in your income plus also if interest passes 10k a year ull have to pay tds at 10% on whole amount rather than the money it passes over 10k(E.g u earn 9999 no TDS ,if u earn 10k No TDS,If u earn 10001 TDS applies on overall 10001 and 1000+ST goes to government)

I prefer ELSS becoz though its risky and doesnt guarantee principal...but they are the best form of mutual fund investment as the fund managers know u cant remove your money when market is going low so he does sound investments(Now my e.g....i invested some 30-40k 3 years bak..and within 3 -4 months my investment was giving 20-25% return almost it reached 28%...than suddenly market crashed and i wasat 60% of my principal invested...40% loss..at present scenario again i m getting 15% return though i have to calculate cumulative return whether it was FD or elss which gave me better return but atleast i was safe from that tds mess)

Anyways according to new direct tax code more preference is being given to insurance and no mention about ELSS or also its like it will come under tax ambit so i guess even that also i cant comment..since EET regime is near ...

Anyways PPF though long is the best form according to me; u invest huge money(upto 70k limit) plus u cant touch it for 15 years hence it sounds a good money for retirement rather than ULIPS

The person who wants to invest decides whats is his requirement ...long term short term than only one can decide

YA as a newbie and making first investment u starting young the basic principal is to invest max in risky stuff....Like ELSS,MF and all...70% of your money ..than as stage passes and u reach 40 -50 years of age max should be in insurance and least in equity market
 
Following things are covered in 80CC

i) PPF ( Max 70k )

iii) LIC policies ( Term policies are better for insurance purpose )- A Must

ii) Tax Saving Mutual Fund Schems ( Lockin 3 yrs) - best option lot of people find it risky but good in long term

iii) If find ULIP( Unit Linked Insurance Policies ) suitable

iv) Tax saving Fixed Deposits ( Lockin 5 yrs )

I would suggest spread 1 lac in above any of 3 options( Max ).

For e.g Lic( term insurance ) < PPF < Tax saving MF ( At young age ) so you get good returns in long term
 
rishp said:
Following things are covered in 80CC
i) PPF ( Max 70k )
iii) LIC policies ( Term policies are better for insurance purpose )- A Must
ii) Tax Saving Mutual Fund Schems ( Lockin 3 yrs) - best option lot of people find it risky but good in long term
iii) If find ULIP( Unit Linked Insurance Policies ) suitable
iv) Tax saving Fixed Deposits ( Lockin 5 yrs )

I would suggest spread 1 lac in above any of 3 options( Max ).
For e.g Lic( term insurance ) < PPF < Tax saving MF ( At young age ) so you get good returns in long term
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LIC is for life right??
Medical insurance too counts in it na?15k for personal and 10k extra for parents i guess

And people staying away from term policy saying its waste of money as u dont get money bak if nuthing happens should treat it as money invested in mobile...In long run term insurance might give better return than endowment..as premiums are way high in endowment and summ assured is less as u get your money bak....in term u can huge sum assured but money invested wont be return
 
MAGNeT said:
LIC is for life right??
Medical insurance too counts in it na?15k for personal and 10k extra for parents i guess

And people staying away from term policy saying its waste of money as u dont get money bak if nuthing happens should treat it as money invested in mobile...In long run term insurance might give better return than endowment..as premiums are way high in endowment and summ assured is less as u get your money bak....in term u can huge sum assured but money invested wont be return
Click to expand...

Just to re-iterate the same point... instead of investing '2x' amount in ULIPS, invest 'x' amount in term insurance and get much higher risk cover and invest the remaining 'x' amount in a reliable Tax saving MF and earn the same returns that you get from a ULIP.
 
fundusanju said:
Just to re-iterate the same point... instead of investing '2x' amount in ULIPS, invest 'x' amount in term insurance and get much higher risk cover and invest the remaining 'x' amount in a reliable Tax saving MF and earn the same returns that you get from a ULIP.
Click to expand...

On contrary ill say avoid ULIP as far as possible
 
MAGNeT said:
LIC is for life right??
Medical insurance too counts in it na?15k for personal and 10k extra for parents i guess

Yes it is also covered

And people staying away from term policy saying its waste of money as u dont get money bak if nuthing happens should treat it as money invested in mobile...In long run term insurance might give better return than endowment..as premiums are way high in endowment and summ assured is less as u get your money bak....in term u can huge sum assured but money invested wont be return
Click to expand...

Why I mentioned because it is true Insurance and not an investment.
Insurance is required for anybody , for his/her beloved and dependents in case anything happens. And also you get good sum insured for less premium. If anybody starts his term insurance early and for 25-35 yrs premium is few thousands and sum insurance goes in lakhs which will be sufficient enough . e.g. If person is of 27 yrs old, for 25 yrs term and sum insured is 25 lakh premium is 8k/yr which is good.

For Investment there are 'n' no of options.

So Insurance should not be coupled with Investment.As this the case with all endowment and ULIP plans.

Best strategy would be Term Insurance + ( SIP in MF or Recurring Deposits or Fixed deposits )
 
setuniket said:
Mutual Fund. I know this opinion is strange(and to an extent stupid), as I am asking one to invest in Equity against Debt. But this is simply because I have been investing in equity based funds since last 15 years or more and in every instance I have got healthy returns overall. 3yr lock means fund manager plans and invests accordingly.
Click to expand...

But i thought MFs were better over a longer term than just 3 yrs

MAGNeT said:
I prefer ELSS becoz though its risky and doesnt guarantee principal...but they are the best form of mutual fund investment as the fund managers know u cant remove your money when market is going low so he does sound investments(Now my e.g....i invested some 30-40k 3 years bak..and within 3 -4 months my investment was giving 20-25% return almost it reached 28%...than suddenly market crashed and i wasat 60% of my principal invested...40% loss..at present scenario again i m getting 15% return though i have to calculate cumulative return whether it was FD or elss which gave me better return
Click to expand...

So you can see here that tho magnet might have ended up with less than principal after 3 yrs, so what does he do ?

Reinvest again, and hope to make it back+earnings in the future or did i get this wrong ?

MAGNeT said:
Problem with Tax saving FDs is not the 5 years lock in(according to me)..if u can wait for 3 years in ELSS than 2 years more in FD wont be a big deal...though principal assured and a bit extra % interest in FD(than regular FDs) but what people forget to judge is this interest also counts in your income
Click to expand...
So if this is the case then all these taxsaver FDs and even NSC's only defer your tax payment till maturity where you have the same hassle again :(
MAGNeT said:
plus also if interest passes 10k a year ull have to pay tds at 10% on whole amount rather than the money it passes over 10k(E.g u earn 9999 no TDS ,if u earn 10k No TDS,If u earn 10001 TDS applies on overall 10001 and 1000+ST goes to government)
Click to expand...
This bit i did not understand. I thought banks deduct 10.3% regardless of the amount.
 
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