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Thursday, 29 June 2017

Quick look at Common Deductions to maximize IT Refund


PPF:
PPF might have the most consistent returns as compared to the other options but they are lesser than the rest. Being said that, the most important factor about PPF is that it is backed by the central government so it carries zero risk. We might find this very common amongst the senior salaried individuals.

NPS (New Pension Scheme):
NPS is a contribution pension system introduced by the government, aimed at providing steady income after retirement. NPS is ideal for those individuals who come from unorganised sector and the ones who are not provided the benefit of pension from the employers. Unlike PPF, there is no ceiling on the amount one can invest in the NPS. The NPS works on simple mechanism. Investors contribute a monthly amount towards their NPS account. This monthly contribution is invested as per investor’s choice and risk profile. So one gets to pick where he/she wants to invest. And now you can open your NPS account in just 30 minutes if your bank account is linked to your PAN. The bank will verify the KYC document and clear your application if everything is in order. The NPS will be especially useful for taxpayers who had stayed away from it till now but want to join after the exemption announced in this year’s budget. They can avail the additional benefit of up to Rs. 50,000 under section 80CCD(1b) of the Income Tax Act by investing in it.

Insurance:
Today, there is no shortage of investment option for a person to choose from. Modern day investment includes gold, property, fixed income instrument, mutual funds and of course life insurance. Life insurance is a unique investment that helps you to meet dual needs- saving for life’s important goals and protecting your assets as well. One needs to think about the insurance cover. Your cover should be enough to ensure that it gives your family enough funds to meet the future goals. Life Insurance premium is eligible for tax deduction under section 80C. And the payment proceeds of a life insurance policy are exempt under section 10(10D) which includes maturity amount as well as death claims.

Home Loan Repayment:
Buying a home is one of the biggest financial investments you may make in your lifetime. With improved housing finance facilities and tax deduction benefits, today’s young generation looks at investing in their dream home at the early stage of their carriers. In case of the home loan, the component of your EMI which goes towards principal is eligible to be claimed under section 80C. Besides the deduction allowed on principal repayment, you can also claim payment made towards stamp duty and registration charges under section 80C in the year in which they were paid. At the same time, the interest component in the EMI can be claimed as deduction. The only condition is that you must be both an owner and co-borrower in the loan to claim tax benefits. The deduction can be claimed from the year of completion of the construction. Every year a maximum of Rs.2 Lakh can be claimed for a house that is used as own residence. In case, the house is rented the entire interest amount is can be claimed as deduction.

ELSS:
Again, the best investment opportunity is none other than ELSS (Equity Linked Savings Scheme). These are diversified equity funds with a lock in period of 3 years. You may wonder what’s the fuss about ELSS that everyone in the town seems to be talking about it. Be it a young energetic entrepreneur or a senior salaried person, be it a housewife or a corporate executive, ELSS suits the needs of about everyone. Of course, it carries a bit more risk due to the equity markets as compared to the good old PPF and NCS. But being said that, the lock in period of 3 years ensures that the short-term market volatilities do not affect the investments.
Anyone having a valid PAN is eligible to invest into an ELSS. Different financial institutions offer different schemes to suit your risk-taking appetite. You can also invest online and save yourself some time and agent commission. Investment in ELSS is eligible for deduction under section 80C. You can invest upto a maximum of Rs.1,50,000.

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