Financial Year 2017-18 is going to close today and you must have made all the required investments to save tax as well as for meeting your financial goals by this time. However, if you have not done that because of your busy schedule or for any other reason, then you need to hurry up as the D-Day of March 31, which is the last day for saving tax for FY17-18, is finally here and you have very limited time left with you. Therefore, you need to make a quick move to save income tax, if you have not exhausted your entire investment limit yet.
Here are some of the best investment avenues which you may consider for last-minute tax saving:
1. NPS: National Pension Scheme is a safe option to invest in because of being a government-sponsored pension plan. This scheme gives the option of saving taxes u/s 80C. You can invest in this scheme even after exhausting the investment limit of Rs 1,50,000 available under section 80C. That is, an extra deduction of Rs 50,000 is available in case of investing in NPS. Another advantage is that a minimum amount of pension is assured irrespective of the contribution. Although there is no specific interest rate set for it, however, currently it is giving returns in the range of 12 to 14 per cent, which is one of the highest in the industry.
2. ELSS: Equity Linked Savings Scheme (ELSS) is also one of the best tax-saving options. The scheme is a diversified equity option that qualifies for deduction under Section 80C of the Income Tax Act. “With this option people can benefit from the capital appreciation of funds. Interest rates are reset on a quarterly basis according to the security rates prescribed by the government. ELSS has a short lock-in period, and is part of the systematic investment plan,” says Brijesh Parnami, Executive Director & CEO, Essel Wealth Services.
Apart from getting deduction u/s 80C on your investments, returns are also tax free u/s 10(38) at the time of redemption. However, LTCG (long-term capital gains) exceeding Rs 1 lakh will be taxable from April 1, 2018. Also, to avail the Sec 80C benefit, the funds should be held for at least 3 years.
3. PPF: If you are not willing to take any market risk, then PPF (Public Provident Fund) may be the best-suited investment option for you for saving tax. “I believe PPF is still a good debt investment and one can’t ignore debt in the overall allocation of last-minute tax-saving plan. PPF is more suitable for businessmen and professionals compared to the salaried class which enjoys the benefit of EPF,” says Parnami.
However, salaried people can and should also invest in PPF because of its numerous benefits and better returns. Although PPF has a lock-in period of 15 years, but it also provides a few options of early withdrawal. Moreover, your PPF investments, withdrawals and interest earned besides the corpus you receive at the time of maturity are also tax-free.
4. Health Insurance: It is said that health is wealth, and what a better way to protect the health of yours as well as that of your family than getting a health insurance cover? You can get deductions up to Rs 25,000 under Section 80D on the health insurance premiums paid for yourself, your spouse & your kids who are dependent on you. For your parents also you can get a deduction of Rs 25,000, which can go up to Rs 30,000 in case they are a senior citizen. Good news is that from Financial Year 2018-19, senior citizens can claim a maximum deduction of Rs 50,000 for securing their health.
“Getting a health insurance premium payment in last minute can provide a maximum deduction of Rs 25,000 annually. We suggest that the first step in any financial plan should be to ensure that one has adequate health insurance,” says Parnami.
5. NSC: National Savings Certificate is one of the most popular tax-saving schemes for small taxpayers, which is available at all post offices in India. There is no maximum investment limit, and minimum Rs 100 needs to be invested every year. Investments up to Rs 150,000 in a year are tax free u/s 80C of the I-T Act. Interest earned is taxable, but reinvestment of interest earned also qualifies for deduction u/s 80C. NSC has a lock-in period of 5 years only. Therefore, it is suitable for those who want to invest for medium-term financial goals.