March 1: With the financial year coming to close, the days are numbered to make investment to save tax liability. Here are some tips on investments in saving plans to minimise your tax. So take some time off from the election hungama and pick up your pen to tick the right mode.Public Provident Fund (PPF): The PPF is a statutory scheme of the Central government framed under the provision of the Public Provident Fund Act, 1968. Investment in PPF can be made by all assessees who are individuals or belong to Hindu undivided families (HUF). PPF provides total exemption with regard to the interest earned on investments. A PPF account can be opened in any of the State Bank of India (SBI) branches or its subsidiaries or in the post offices.
(i) The minimum subscription in a PPF account is Rs 100 and cannot exceed Rs 60,000 in any financial year. The maturity period of the account is 15 years and no withdrawals can be made during the first five years from the end of the year in which the initialsubscription was made. The subscriber may withdraw from the balance to his credit an amount not exceeding 50 per cent of the amount that stood to his credit at the end of the fourth year immediately preceding the year of withdrawal, or the balance at the end of the preceding following years, which ever is lower. Investments in the account earn interest of 12 per cent per annum which is free from tax. If the tax benefits from this investments is taken into account, the rate of return that it guarantees is much higher than any other form of investment.
(ii) A subscriber to PPF can also avail of loan facilities under the scheme any time between the third and the sixth financial year.
(iii) The PPF scheme also allows you to withdraw the entire amount to your credit after adjustment of dues if any to the government on completion of the 15-year period after the end of the year in which you opened your account. This is, of course, optional and you may continue your account without any loss of benefits.
PPF taxbonanza:
1. The amount invested in the account is eligible for tax rebate U/s 88 at 20 per cent of the investments up to maximum limit of Rs 60,000.
2. The interest you earn in the PPF account is totally exempt from the income tax U/s 10(11) of the Income Tax Act, 1961.
3. The amount received at the time of maturity of the account or at the time of withdrawal is also totally exempt from tax in the later years.
Contribution to PPF account made in the name of the wife, or husband and any child of such individual will be eligible for rebate of income tax in case of individual.
National Saving Certificates (NSC): This is another popular investment avenue. NSCs are issued by post offices in denominations of Rs 100, 500, 1,000, 5,000 and 10,000. There is no limit on investment and the certificates can be purchased by individuals in jointly. The NSC series VIII, which is in vogue, earns interest at 12 per cent per annum compounded, half yearly payable on maturity. The investment is locked up for sixyears. NSCs are eligible securities for taking loans from scheduled banks.
NSC tax bonanza:
1. The initial investment and the accrued interest during the first five years qualify for income tax rebate U/s 88 which is 20 per cent of the investments made.
2. The interest earned on NSC is also eligible for rebate till the fifth year of investment.
3. The interest on the investment is eligible for exemption U/s 80-L up to a limit of Rs 15,000 per annum.
So do the needful before the time for investments expires and one has to pay higher tax on income.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
