The Indian
Express
The Financial Express
Latest News
EIW
Market Indicators
Screen
Express Computers
Graffiti
Crossword
Advertisers Forum
Travel & Tourism
Information Technology
Drumbeat: Ad Buzzaar
Astrosurf
Eco-India
Dr Know
Career India
Business Forum
Match Maker
Express Properties
|
| |
Monday, May 4, 1998
Invest judiciously for tax benefits
Shailendra Saxena
For those persons who are very rich, the amount of income tax that can be saved in a financial year by availing the income tax rebates admissible under Sec 88, 80CCC(I), 80L, 16(i), 80D, 80DD and 80E, etc, may not appear to be substantial. But for an overwhelming majority of investors the benefits available under such sections add up to a sizeable amount. If an investor invests first of all in schemes that are eligible for income tax rebates under the sections cited above, he or she stands to gain immensely in the form of multiple benefits. It may, therefore, be prudent to obtain the maximum income tax rebates before investing money elsewhere (like in shares or debentures, etc). Nowadays, sizeable benefits are available under Sec 54EA and EB, too, even for affluent investors.Some of the major benefits of investing in schemes which are eligible for income tax rebates under Sec 88, 80D and 80CCC(I) in particular are given below: Most of these schemes represent relatively safer investments -- going bythe past track records -- with the exception of Equity Linked Saving Schemes (ELSS). In future, too, this trend may continue. Generally, the coupon rate or interest rate on such investments appears to be rather conservative but after factoring the income tax relief, the annualised rate of return becomes quite attractive in relation to prevailing interest rates on safer instruments and the general rate of inflation. Considering the annualised return and the safety aspect together, such tax saving investment options become quite attractive. The available income tax relief works as an incentive to save more and thus it serves to increase savings which, in turn, help in building up sizeable capital in the long run. Different Sections of income tax (some of the common ones have been mentioned above) give income tax relief for different types of investments. This means that if one avails the income tax rebates available under the popular Sections, as mentioned above, most of the common needs ofindividual investors are met and their important contingencies taken care of. For example, the common needs of building up of capital, life insurance, medical insurance and old age pension are taken care of if one invests judiciously and regularly in the schemes where income tax rebates under Sec 88, 80L, 80D and 80CCC(I), etc, are offered. Various schemes of LIC and GIC, which take care of different contingencies in day to day life by providing life insurance, medical insurance and old age pension, also ensure that savings are made. Income tax rebates on housing loans also encourage people to build shelters for themselves. It may be noted that schemes like ULIP of UTI and the Dhanraksha scheme of LIC offer the income tax rebate under Sec 88, and also provide personal accident insurance up to a limited amount. The lock in periods stipulated under various schemes where income tax rebates are given help small investors in building up their savings. National SavingsCertificates (NSCs) can be pledged to get loans. Certain loans are also available to PPF account holders. And loans for construction of houses are also offered by LIC against life insurance policies. An investor may also invest in stock markets if he or she has already invested adequately in the safe schemes wherein income tax rebates are admissible. Nowadays, one can invest up to Rs 70,000 per annum in infrastructure bonds and get the income tax benefit under Sec 88. Some of the recent offerings by ICICI and IDBI have offered an interest rate on their infrastructure bonds which is higher than the interest rates available to PPF account holders and to those who have invested in NSCs. Most of such offerings also appear to be safe investments as they have got the highest possible credit ratings at the time of their public issues from our credit rating agencies.As our economy is maturing and as it gets integrated with the global economy more and more, several new investment options are openingup gradually for retail investors. This presents new and exciting opportunities for all of us, but it has potential of confusing investors, too. It is imperative in such times that our investment priorities are clear to us. We can, and we must make the best use of emerging opportunities with an open mind. But, if we concentrate on building up the income tax saving investments first, several important imperatives will automatically be taken care of. Then with a solid foundation, one can proceed further on the investment path. And hopefully reap rich rewards. Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
|
 |
|
|
|
