Double benefit of tax saving investments


Coming April the tax saving benefits for both the salaried along with non – salaried a tax payer would have saved tax saving options for the coming fiscal year. From the point of view of an investor they should not only look to save tax but try to generate tax free income. In your quest to obtain the right tax saver mechanism, you need to figure out how returns are expected to be taxed. If any income earned appears to be taxable, then the taxes are expected to eat on to your returns. For example tax free mutual fund does seem to be one of the options of investment. Below are some of the options that will not only help you save tax but help you generating tax free income.

Public provident fund

For a long time since 1968, public provident fund has worked out to be the favourite savings option among investors and still stands tall. You can open a PPF account in your own name or in the name of a minor. The minimum amount of money you can keep in this account is Rs 500 and in a financial year it is 1 lakh 50000 maximum. This would be a combination of you along with the account of a minor.

Basically this is a 15 year scheme that can be extended in 5 years slab. At a bank branch or a post office you can open this account. In case of a few banks it can be opened via an online source. A person of any age can open a PPF account. Even if someone has an EPF account they can open a PPF account.

Provident fund for employees

For salaried employees this presents not only an option to save taxes but generate tax free corpus. Towards an EPF account an employee goes on to contribute 12 % of their basic salary. An employee also puts their share but only 3.67 % goes on to the account.

Unit linked insurance plan

This replicates to be a hybrid product offering a combination of savings and protection. Not only life insurance is provided but it also provides a channel where you evolve your savings on to market linked investments. This helps to take stock of your long term goals.

In most of the ULIPs there are 5 to 9 investment options and normally it can have a period of 10 to 15 years. But the standard lock in period is 5 years. If you exit the policy after 5 years the amount is tax free. In between if you go on to switch the holding period between operations it is also exempt from tax.

A point to consider ULIP might not work for all investors. For any investor who is comfortable and adept in managing the ELSS schemes and at a parallel level holds an insurance plan, there is no need to opt for a ULIP. The mind set of investors to invest in ULIP would be to look at funds in the next 10 years.

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