How different taxpayers can distribute tax-saving investments


Younger investor

A younger investor can consider equity-linked savings schemes (ELSS) as a means to invest in equities. These tax-saving plans are just like any diversified equity fund. If you have EPF and invest in infra bonds, you don’t need any more debt in the portfolio. 

Put the remaining limit of your Section 80C investments in ELSS funds. Don’t get lured by the high returns offered by five-year bank fixed deposits (FDs). In three years, the ELSS is likely to give you higher returns than the FD. 

Tax payer with loans 

It seems the taxman has a soft corner for borrowers. A taxpayer who has taken a home loan will find utilising his Section 80C limit a breeze. A large chunk will be taken care of by the principal portion of the home loan repayment. The interest paid on the home loan also gets deduction under Section 24. 

Similarly, an education loan is eligible for tax deduction under Section 80E. Life insurance and medical insurance are necessary for those who have taken large loans. 

Parent taxpayer 

With tuition fees of up to two kids also getting tax deduction, a parent with school-going children will not have to lock up too much money in Section 80C. EPF and school fees will nearly exhaust the Rs 1 lakh limit. 

In many cases, such taxpayers don’t have to make any further tax-saving investments other than theinfrastructure bonds under Section 80CCF. Any shortfall can be taken care of by the life insurance or pension plans in the portfolio. 

Self employed taxpayer 

For no other category of taxpayers is tax planning as important as for self-employed professionals and small businessmen. With no EPF, a self-employed taxpayer needs to put a large sum in thePPF. 

It will help him build up a nest egg. Self-employed professionals also need a larger life insurance cover and medical insurance. However, they should not ignore the potential of equities. The ELSS can be used to invest in the equity markets. 

Retired taxpayer 

Senior citizens should stick to risk-free debt investments. The Senior Citizen’s Savings Scheme is a useful option for those looking for periodic payment. It should form the bulk of the Section 80C investments. Bank fixed deposits are also attractive and offer higher returns. However, they don’t give periodic payouts. Senior citizens should opt for ELSS if they need a bit of equity exposure to beat inflation, but it should not exceed 10-20% of the portfolio.

Source: Economic Times

About CPWD Engineers' Association

It is a great pleasure to inform you that CPWD Engineers Association has launched its Blogging page. Now this page will bring to you latest developments/activities of our Members. All efforts are being made to ensure that this website caters to the requirement of CPWD Engineers so far as their various information through this Association is concerned. In course of time this page would be the most useful source of information and would reduce the gap between the Engineers and this Association. Please must inform to other members too. This page is added for various interesting things, Important News & Activities of Association .

Posted on Tue, Feb 7th, 2012, in how to save tax, What's new and tagged , . Bookmark the permalink. Leave a comment.

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