India to tax each investment

The interest on new issue of these certificates is revised quarterly by the government.

However, it is to be remembered that the interest earned every year, except the last one, can be claimed as a deduction from taxable interest under section 80C subject to the limit under this section. That is only if the deduction limit, currently at Rs 1.5 lakh, is not already fully used (per financial year) then one can claim this interest as a deduction thereby making it effectively tax free. For the quarter ending March 31, 2022, NSC are offering 6.8 per cent compounded annually but payable at maturity.

  • Five-year Bank Fixed Deposits (FDs)

Any term deposit with a tenure of five years with a scheduled bank also qualifies for deduction under section 80C and the interest earned on it is taxable.

So if you have an outstanding home loan in your name, then the repayment of the principal amount made by you in a financial year can be claimed as deduction under Section 80C and you need not invest in other tax-saving products only to avail tax benefits, if the Section 80C limit is fully utilised in home loan repayment.

Further, any payment made to development authorities like Delhi Development Authority (DDA) in order to purchase a house (which has been allotted to you in a scheme made in this regard) also qualifies as deduction under section 80C.

  • Sukanya Samriddhi Account

In this scheme, you can open an account on behalf of your minor daughter till the age of 10. Any amount deposited in this account would be eligible for deduction under Section 80C.

Income Tax Slab Rates for FY 20-21 (AY 2021-22) & FY 21-22 (AY 2022-23)

The income tax slab rates for FY20-21(AY 2021-22) & FY 21-22 (AY 2022-23) can be understood as follows –

Income tax slab rate under New Tax regime from FY 2020-21

The New Tax regime in place from FY 2020-21 makes it possible for taxpayers to choose from the following options –

  • Income tax can be paid at reduced rates keeping in mind the New Tax regime provided said taxpayers are willing to give up certain permissible exemptions and deductions in place under income tax.
  • Taxpayers may continue to pay their taxes in accordance with the pre-existing tax rates.

India to tax each investments

They are available for different time durations like one, two, three and five years but only five-year POTD qualifies for tax-saving under section 80C. The interest on these is compounded quarterly, but paid annually.

The interest rate is reviewed by the government every quarter. Currently, they are offering 6.7 per cent a year as decided by the government for Jan-March 2022 quarter.

Please note that the interest earned is entirely taxable.

Also Read:How to invest in Post office Time Deposit

  • NABARD Rural Bonds

The bonds issued by NABARD (National Bank for Agriculture and Rural Development) also qualify for deduction under section 80C. However, the availability of these bonds for investment depends on the government notifying the same.

In recent years, these have not been available for section 80C investment.

You can invest as low as Rs 500 and as high as Rs 1.5 lakh in a financial year. The interest on PPF is currently tax-free (compounded yearly) and the maturity period is 15 years.

A point worth noting is that the interest rate is assured but not fixed. The rate is subject to revision every quarter. The interest rate effective for the quarter ending March 31, 2022 is 7.1 per cent.

Also Read:How to open PPF account

  • Life Insurance Premiums

Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction.
Please note that the premium paid by you for your parents (father/ mother/ both) or your in-laws is not eligible for deduction under Section 80C.

If you are paying premium for more than one insurance policy, all the premiums can be included.

Since tax rules are subject to change at any time, the reader is advised to consult a tax advisor to determine the rates that may be applicable to him. The information below is only a brief summary of rules that are complex and lengthy, and is not meant to be a substitute for professional advice.

  • Taxation of direct investments

An investment in real estate gets the benefit of long-term capital gains if it is held for a period of at least 36 months.

The long-term capital gains tax rate is 20% while the short-term rate can be as high as 30%. (There are also some additional taxes that amount to less than 1%.) Although long-term rates are significantly less than short-term rates, one has to weigh that against the economics of the investment opportunity.

In case of ULIPs having annual premium more than Rs 2.5 lakh the income/return on maturity shall be treated as capital gain and charged accordingly under section 112A, however the cap of Rs. 2.5 lakh on the annual premium of ULIP shall be applicable only for the policies taken on or after 01.02.2021

Also Read:8 Ulip charges you need to know about

  • Payment of Tuition Fees

Paying your kids’ school fees is an expenditure which can’t be ignored. Now imagine that the amount paid by you as tuition fees (excluding development fee of donation amount), whether at the time of admission or thereafter, is eligible as deduction to you and will help you save tax.

Please note that the fees should be paid to a school, college, or university in India only.

Also Read:Top 5 tax-savings bank FDs

  • Senior Citizen Savings Scheme 2004 (SCSS)

This scheme, as the name suggests, is meant only for senior citizens. Any individual in the 60 or above age group can open an account under this scheme.

An individual above 55 but less than 60, and having retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme, can also open an account under this scheme, but such an account must be opened within three months of the retirement date.

If you are a retired defence personnel, then there is a bad news for you. As per the new rules effective from October 3, 2017, retired defence personnel can invest only if he is 50 years of age.

New vs existing tax regime: All you need to know)Therefore, if you opt for new tax regime in current FY 2021-22, then you will not be able to claim deduction under section 80C. Here’s a list of different investments and expenditures which can be claimed as deduction by the taxpayer under section 80C for the current financial year under old/exisitng tax regime.

  • Employees’ Provident Fund (EPF) & Voluntary Provident Fund (VPF)

A part of your salary is deducted monthly as your contribution towards EPF.

The total amount deducted annually can be claimed by you as deduction while computing your total taxable income. However, you must check with your employer how much interest is earned on the corpus during the financial year.

An employee can increase this contribution if he is willing to get a less take-home salary.

Earlier, retired defence personnel could invest in this scheme irrespective of age, provided they met other specified conditions.

Any investment in this account would be eligible as deduction under Section 80C subject to the limit under this section. The current annual rate of interest offered under this scheme is 7.4 per cent per annum payable from the date of deposit of 31st March/30th Sept/31st December in the first instance & thereafter, interest shall be payable on 31st March, 30th June, 30th Sept and 31st December.

Interest on this scheme is also reset every quarter by the government for new accounts opened under the scheme.

Also Read:Everything you need to know about Senior Citizen Savings Scheme

  • Five-year Post Office Time Deposit (POTD) Scheme

POTDs are similar to bank fixed deposits.
Short-term opportunities tend to have higher returns and they are also more predictable.

  • Taxation of securities transactions

Most foreign investment in Indian securities comes from jurisdictions that have preferential tax treaties with India. For investments that are not subject to such a treaty, the general prevailing Indian taxation of securities transactions will apply. Investments in equities can be expected to earn dividends and have a capital gain or loss at the time of resale. Investments in debt will earn interest and could also have a capital gain or loss.

Dividends paid by Indian companies are not subject to tax at the hands of the recipient.

Leave a Reply

Your email address will not be published.