PRESENTATION TOPIC : instruments of tax saving for salaried person SUBMITTED TO : NILESH Patel swati mehta Group member

: prajapati anil patel banti Zalawadia jatin Bhikhadiya vishal Darshan Vijay

What is salary
Income under heads of salary is defined as remuneration received by an individual for services rendered by him to undertake a contract whether it is expressed or implied.

instruments of tax saving

1. 2. 3. 4. 5. 6. Equity Linked Saving schemes (ELSS) Life and Medical Insurance Plans Housing Loan Public Provident Fund National Savings Certificate Term Deposits and Bonds

Equity Linked Saving schemes (ELSS)

Equity linked saving schemes are a kind of mutual funds with Tax benefits. It is just like other tax saving instruments like National Savings Certificate and Public Provident Fund. Main advantage with ELSS is lock-in period is only 3 years while for NSC it is 6 years and for PPF it is 15 years. limitation of ELSS is risk factor which is very high in ELSS. Premature withdrawal is not allowed in ELSS. As per Income Tax act 80c investment up to Rs 1,00,000 are eligible for deduction from the gross total income hence reducing the total taxable income. For example, if your total annual income is Rs 3,00,000 and you invest Rs 1,00,000 in ELSS then your taxable income will become Rs 2,00,000. Some of the ELSS are Birla Sun Life Tax Relief 96, HDFC Tax Saver, Franklin India Tax Shield, Sahara Tax Gain, Reliance Tax Saver

Life and Medical Insurance Plans

Life Insurance Policies is the most popular tax saving instruments among tax payers. Insurance policies offer twin advantage for tax deduction on premium paid and insurance cover for the insurer and his family in the event of a financially weakening event such as accident, death, etc. The premium paid on life insurance policies qualify for tax deductions under section 80C, subject to a maximum of Rs.1 lakh per annum. Most companies offering Life Insurance also offer medical insurance policies as well as pension plans which offer tax deduction under section 80D, subject to a maximum of Rs.10,000(rs.15000 for senior citizens above 65 years of age) in a year. In life and medical insurance plan your wife or your children can also be included in Section 80C tax deduction.

Housing Loan
The tax deduction on both the principal and the interest paid on the housing loan is available. The maximum deductible on account of interest paid on housing loan during the financial year is RS.1.50 Lakh UNDER SECTION 24(B). While the maximum amount deductible on account of principal repayment of housing loan is Rs1 Lakh under section 80C. Hence a tax payer who has taken the housing loan is eligible for deduction of a maximum amount of rs. 2.50 lakh on account of principal repayment and interest paid on housing loan. Housing loan for more than one house can also be claimed. All the benefit of tax under section 80 c will reversed if house property is sold within 5 year from purchase of house property.

Public Provident Fund

The contributions made to the Employees provident fund (EPF) and Public Provident Fund (PPF) are also eligible for tax deductions under section 80C. In public provident fund minimum amount of contribution is Rs 500 and maximum is Rs 70,000. Current rate of interest in public provident fund is 8% Normal maturity period of public provident fund is 15 years. A subscriber can take a loan from the fund in case of need. The first loan can be taken in the third year of opening the account. The amount of loan will be restricted to 25% of the balance including interest.

National Savings Certificate

National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. It can be bought at any post offices in the country. Minimum investment Rs. 500/- No maximum limit. The tax deduction on NSC is available subject to overall limit of Rs.1 lakh under section 80C. Rate of interest of NSC is 8 per cent compounded half-yearly. Companies, Trusts, Societies and any other Institutions not eligible to purchase. Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.

Term Deposits and Bonds

Bond is also tax deductable for an additional maximum amount of Rs 20,000 over and above the 1 Lakh limit available under section 80C. Many of the commercial banks have fixed deposit schemes which qualify for tax deductions. These deposits have a lock-in-period of five years and a coupon rate of 8-9 percent. Investments in these deposits are subject to the tax deduction limit of rs. 1 lakh per annum under section 80C. These are issued by infrastructure companies, government, public sector unit (PSU).

There are other specified expenses which qualify for deductions under section 80C such as : Registration charges Stamp duty paid on house property Tuition fees for childrens education Pension Funds 5-Yr bank fixed deposits (FDs) Senior Citizen Savings Scheme 2004 5-Yr post office time deposit (POTD) scheme