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Income Tax planning tips for 2013-14

income-tax planning You still have 2 months left out for planning your income taxes for the year 2013-14. If you can plan properly with the available instruments for tax exemptions, you can save quite a lot of money from your Income tax.

Following are some of the options available for tax savings in the current year:

 

Utilize your Section 80c completely

You can claim most of your savings & investments under the Section 80(c). However you can claim a maximum of Rs. 1 lakh deductions based on all the investments/savings under this section. Try to completely utilize this 1 Lakh limit. Following are the items covered in this section:

 

  • Provident Fund
    You can include your (employee’s) contributions to the PF in this segment and get the tax benefits for all of your contribution.

     

  • Public Provident Fund

You can include your PPF contribution to get exempted from the income.

       

    • Life insurance premium

Getting a life insurance cover is very important. You can buy online insurance plans and get the insurance premium deducted from your income. The word of advice is not go in for traditional insurance plans but rather choose Equity linked plans which will give better returns.

       

    • Pension plans

Planning for your retirement is also very crucial. You can invest in the NPS (National Pension System) schemes tier I account. This investment can be exempted from the income tax.

       

    • Equity Linked Saving Schemes of mutual funds

One can invest in the ELSS mutual funds and gain the tax exemption. However you should note that investment in this segment will be with equities and hence a pinch of risk is associated with this kind of investment. ELSS funds at the same time can offer good returns also.

       

    • Infrastructure bonds

Investment by buying infrastructure bonds is also a good option for getting your investment exempt from the income tax. These bonds do give a decent amount of returns.

       

    • National Savings Certificate</li>

Buying NSC is also a viable option now. You can now buy 5 years NSC which can give 8.5% interest per annum. Similarly 10 years NSC can give you an interest of 8.8% per annum.

However please note that a maximum of Rs. 1 Lakh can get exempted under Section 80 (c), including all the investment/savings options shown above.

 

Tax free bonds

Tax free bonds are also attracting investments from many individuals. With the tax-free bonds, the investor cannot claim exemptions under Section 80C. However all the interest earned out of these bonds are tax free.

Following  are some of the Tax free bonds are available for investment currently:

Scheme / Company Coupon Rate Maturity Date
INDIAN RAILWAY FINANCE CORP 8.10% 23-Feb-2027
NATIONAL HIGHWAYS AUTHORITY OF INDIA 8.30% 25-Jan-2027
HOUSING AND URBAN DEVELOPMENT CORP 8.20% 05-Mar-2027
NTPC LIMITED 8.91% 16-Dec-2033
POWER FINANCE CORP LIMITED 8.20% 01-Feb-2022

 

 

Rajiv Gandhi Equity Savings Scheme or RGESS

Rajiv gandhi Equity Savings Scheme

If you have not invested in the stock market till now and plan to do it for the first time and if your annual income is less than 10 Lakhs, then you can get tax exemption under the Rajiv Gandhi Equity Savings Scheme or RGESS.

Under this scheme, new investors in the equity markets can get a tax exemption of Rs. 50,000.


 

 

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