|» What is Equity Linked Saving Schemes ELSS?|
|» What is National Pension System (NPS) and its advantages?|
|» Tell us Rajiv Gandhi Equity Saving Scheme (RGESS)?|
|» Describe Unit Linked Insurance Plans (ULIPs)?|
|» What are Tax Free Bonds?|
|» How to Save Capital Gain Tax?|
|» Other Tax saving solutions|
ELSS is an open-ended Equity Mutual Fund that provides investors with an opportunity to grow their money along with tax saving benefits. This scheme invests 65% in equity related instruments that are notified to avail benefits under section 80c.
» As the scheme invests in equity instruments, over a period of time it would help you grow wealth.
» If you consider investing in ELSS, you stand eligible for an exemption up to Rs. 1.5 Lakh under section 80c. This is a good investment opportunity for those who have a significant amount left to be exhausted under 80c investment.
NPS is a pension scheme offered by Government of India where, you can regularly invest in this scheme and get a part in lump-sum at your retirement and it gives fixed monthly income for the lifetime. It has proved to be common man's doorway to getting pension benefits post retirement.
» It is a cost effective mode of planning for one's retirement, the cost structure is far more efficient when compared with charges levied by mutual funds or other investment options.
The exemption on tax here is given special treatment with additional Rs. 50,000. Apart from 150,000 under section 80c, NPS qualifies for additional 50,000 under section 80 CCD (1B). However, withdrawal from NPS is liable for tax unlike other tax-free retirement savings schemes like public provident fund (PPF) and employee provident fund (EPF).
To inculcate saving habits in small investor, government launched RGESS in 2012. The intention is to encourage people to invest in domestic market, particularly the segment of investors who have never been exposed to the equity market. If you are an Indian resident with annual income of less than 12 Lakhs and have never invested in equity, you are eligible to opt for Rajiv Gandhi Equity Savings Scheme. The scheme allows first time investors to invest up to Rs 50,000 in approved stocks and Mutual Funds. To invest in RGESS you have to open a demat account and submit Form A that would designate the account to RGESS.
» Gains, arising of investments in RGESS are allowed to withdraw after a year.
By investing in Rajiv Gandhi Equity Saving Scheme you can claim income tax deduction on 50 percent of the investment under Section 80 CCG of the Income Tax Act. This is over and above the Rs 1.5 Lakh limit provided under section 80 C. Though there is no limitation of investment amount through the demat account, but tax benefit will only be available on an investment of up to Rs 50,000.
ULIP is a kind of insurance plan offered to policy holders that acts as insurance policy giving investors dual benefits under a single plan. The integrated plan offers features of both insurance and investment. By investing in a ULIP, policyholder will procure units at their Net Asset Value (NAV) and make contributions towards other investment tools such as stocks, bonds and mutual funds.
Range: It offers you a wide choice of investments, so that based on your need and risk appetite you can invest in pure equity, debt or select a right mix of both these funds.
ULIP investment qualifies for tax exemption under section 80 C of Income Tax Act and hence you can save up to Rs. 1,50,000. The premium that is paid for the policy will be added to the other eligible investments to get an idea of the total benefits.
Tax Free Bonds
» These bonds have very low default risk as they are issued by government-backed entities.
These bonds are completely tax free but capital gains made on selling of tax-free bonds on stock exchanges are taxed. If the holding period is less than 12 months, capital gains on sale of tax-free bonds on stock exchanges are taxed as per the tax slab of the investor. If bonds are held for more than 12 months, the gains are taxed at 10 per cent.
How to Save Capital Gain Tax?
The Gains that arise on the sale of a Long Term Capital Asset are known as Long Term Capital Gains and Capital Gain Tax is levied on such gains. However, such tax can be saved if this amount is invested in Capital Gains Bonds specified under Section 54EC within 6 months from the date of sale of the previous asset.
» Public Provident Funds (PPF)