Investment: Your saving grace

Feb 11 2014, 09:36 IST
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Good financial planning involves selecting those that are best suited to your needs so that they not only reduce the tax burden. Good financial planning involves selecting those that are best suited to your needs so that they not only reduce the tax burden.
SummarySelecting the right tax-saving instruments is key to effective wealth management. Here are some you could choose from.

the interest earned is taxable.

National Pension Scheme: An ideal investment vehicle for retirement planning, it offers tax-saving under Section 80C. But the deductions are allowed only for contributions to a Tier-I NPS account with a minimum annual investment of Rs 6,000. Also, no premature withdrawals are allowed.

National Savings Certificates and Bank FDs: NSC and bank FDs are widely used financial instruments. Deposits, however, are not tax-free, as is widely believed. Government regulations offer deduction of up to Rs 10,000 on interest earned in the savings bank account.

Life Insurance Policies: The premium paid for a policy covering an individual and his/her immediate family members is deductible up to Rs 1 lakh.

Rajiv Gandhi Equity Savings Scheme: RGESS offers tax savings for a year for first-time investors. They can claim a deduction of 50% of the invested amount. The maximum investment amount is fixed at Rs 50,000 with a maximum deduction of Rs 25,000. This deduction is over and above the Rs 1 lakh limit available under Section 80C.

Pension Plans: Pension plans initiated by life insurance companies also provide tax deductions under Section 80C since 2013. The downside is high fund-management charges.

The writer is CEO, BankBazaar.com

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