Personal Finance News

Only 7 days for FY25 to end: Last-minute tax saving investment ideas

Kolkata: There are a large number of taxpayers who are still with the old tax regime. Though the new tax regime doesn’t allow almost any tax deduction, a whole lot of deductions are available for the old tax regime. One has to select the schemes according to his/her financial goal and not indiscriminately.

The bulk of the saving instruments are mentioned under Section 80C of the Income Tax Act 1961. The most popular among these are PPF (Public Provident Fund), 5-year FDs which are tax-saver FDs, life insurance premiums, NSC (National Savings Certificates), ELSS (equity-linked savings schemes) etc. There is a cumulative ceiling of Rs 1.5 lakh under this section of the legislation. Let’s have a look at the most popular instruments.

Public Provident Fund

Launched in 1968, this is one of the most popular guaranteed-return instruments in India. Currently it offers an interest rate of 7.1% and has a initial maturity period of 15 years. If you don’t have a PPF account, you can easily open one in post offices or designated banks. If you have an account and have not made a contribution in FY25, do so now.

NSC, 5-year tax-saver FDs

The National Savings Certificate and tax-saver Fixed Deposits are a preferred investment instrument for income tax deductions. The NSC can be bought from all post offices and these can be purchased in the name of a minor.

Usually bank FDs do not qualify for income tax benefits unless they are of 5 year maturity. FDs with 5 years of tenure are eligible for income tax deductions but the ceiling for such facility is Rs 1.5 lakh.

Equity Linked Savings Scheme

The ELSS, or equity-linked savings scheme is the only sort of mutual fund that qualifies for tax deductions. These funds have a three-year lock in period. But obviously these bear a bigger element of risk compared too the other instruments in this section since it involves investment in the stock market. ELSS funds typically invest 65% of the money in equity and equity-linked securities. They also invest some of the funds in fixed-income securities.

Senior Citizens Saving Scheme, Sukanya Samriddhi Yojana

From the names it is clear who can invest in Senior Citizens Saving Scheme (SCSS). Also one can open a Sukanya Samriddhi Yojana (SSY) if one has a daughter who is below 10 years. The maximum investment in a SCSS is Rs 30 lakh (for a joint account with spouse) while the maximum amount in a SSY each year is Rs 1.5 lakh.

Pension plans, life insurance premium, ULIP

If you pay premium for life insurance policies or contribute to annuity plans for yourself, self, spouse, children (or even any member of a Hindu Undivided Family), the contributions can be used to claim income tax deductions. ULIPs (unit linked insurance plan) feature a combination of investment and insurance. They have a lock-in period of five years. Tax deductions are offered on premiums paid towards the policy and maturity proceeds according to sections 80C and 10(10D) of the Income Tax Act.

Health insurance premium

Health insurance premiums up to Rs 25,000 for those below 60 years qualifies for income tax deductions. For senior citizens (self and parents, spouse), the ceiling is Rs 50,000.

Expenses that fetch income tax deduction

If you are repaying home loans or paying for the tuition fee of children, these expenses are eligible for tax deductions. However, the tuition fee for only two children qualify for tax deductions. If you are repaying EMIs on home loans, tax deductions are available both on principal and interest. Deduction of up to Rs 1.5 lakh on principal repayment is available under Section 80C. On the interest part, tax deduction is available up to Rs 2 lakh a year under Section 24(b).