Income tax returns filing deadline ends today – top six tax saving instruments detailed

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Income Tax Return

Today is July 31 and as far as the financial world is concerned, it is the last date to file income tax return (ITR) for 2016-17 fiscal or assessment year 2017-18.

There are no plans to extend the deadline said a top government official. While many of you would have already filed your tax returns, there are those who wouldn’t have done so and if you are one of them, we would ask you to keep a few important tax saving instruments in mind that will enable you to constrain your returns but also help you build wealth over the long term.

One of the best tax savings investment option right now is  Equity-Linked Savings Schemes (ELSS) that has the potential to provide you highest return in the category. Though there are risks involved because it is based on the market scenario, but the lock-in period of three years helps you shave off a lot of the risk and ends up giving you good returns in the end.

Public Provident Fund (PPF) is hands-down the safest long-term investment option considering it is backed by the government and offers taxfree return of 7.9 percent. You can fetch tax deduction up to Rs 1.5 Lakh u/s 80C. So effective post tax returns (factoring in tax deduction) for a person in highest tax bracket comes to 12.25 percent.

Insurance plans – both medical and life insurance – are also very good tax saving instruments providing you dual benefit of, protection against eventualities and tax saving u/s 80C and 80D respectively. But one should not mix insurance with investment and should prefer Pure Term Insurance Plan for security. For investment, there are many better options available.

Then there is the Sukanya Samriddhi Yojana (SSY) for those who wish to invest for the future of their girl child less than ten years of age. It provides you with the tax-free interest of 8.4 percent with a tax deduction of up to Rs 1.5L under 80C. Maximum yearly deposit of Rs. 1.5 Lakh can be made for 14 years with a maturity of 21 years. Withdrawals from the scheme are tax exempt, and 50% of the corpus can be withdrawn once the child turns 18.

NPS (New Pension Scheme) is definitely one to look at for those who are planning a long term corpus to fund their retirement. It has potential to provide you returns comparable with any ELSS scheme as both invest in equity and debt instruments only. But NPS has substantially low fund management charges as compared to ELLS maximizing your returns. Further, it can provide you additional deduction u/s 80CCD (1B) up to Rs 50,000 which is over and above Rs. 1.5 lakh under 80C. The only downside is the investment gets locked in till retirement age, and the rate at which the annuity will be fixed is also not sure.

SCSS (Senior Citizens Saving Schemes) is ideal for senior citizens who wish to earn a good return on their investment without any risk as well as want to claim the deduction u/s. 80C. It provides taxable interest of 8.4 percent which is paid on a quarterly basis providing regular income. One can invest maximum 15 lakh for an initial period of 5 years which can be further extended for three years. The option of premature closure is available after one year.

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