The small savings section is one of the most attractive sections for people all over the world. The small savings section provides people flexibility and proves to less burdensome. Small savings requires a very scant amount from the pocket of the investor and ensures a guarantee for better periodical return. Added to this, being small it does not effects the investors other investment decisions. No doubt there exists a better and heavy investment too in form equity-linked savings scheme which provides a higher return and multiple choices in respect to investment decision but still these small savings segment proves to be the favorite in the regard to Investment Boulevard. Small saving segment therefore, engages a prominent section of the investor society towards itself by guaranteeing assured returns to the investors who invests in such small savings segment.
Tax benefits under SEC. 80C enables an investor to invest in small saving schemes, namely, Public Provident Fund (PPF), NSC and other tax saving schemes. We are providing here summary detail about PPF and NSC. You can check the complete detail by visiting that particular link.
Public Provident Fund (PPF): Investors who desire for long term investment with steady returns opt for investment in such fund. The fund provides 8% (8.7% w.e.f. 1.4.2013) return on yearly basis i.e. per annum. The scheme is distributed over 15 years and an investor is required to pay annual contributions every year for ensuring the commitment towards the scheme, which in itself results habitual savings of the investors. The minimum required amount for opting under such scheme is Rs. 5, 000 and the maximum limit is Rs. 1,50,000. Withdrawals from such scheme is only permitted when 6 years have been completed from the end of the financial year in which the first deposit was made, the amount available on such withdrawal shall be equivalent to the amount reflected as the balance in the PPF account over the years in which contributions were made.
Taxability: Taxability exemption in such respect will be allowed up to Rs. 70, 000 for each year under the SEC. 80C added to this privilege the interest on such investment shall also be exempted under SEC. 10 of the Income Tax Act.
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- PPF – Public Provident Fund – Popular Tax Saving Scheme
National Savings Certificate (NSC): National Saving Certificates (NSC) provides 8% (8.5% check chart for more detail about interest) rate of interest which is compounded half yearly. The tenure for investment is 6 years and the investment is locked for such time, which eliminates pre-mature encashment. Annual interest on such earnings is deemed to be reinvested and gets the benefit of tax rebate for the first 5 years under Income Tax Act [SEC. 80C]. The certificates can also be used in case of pledge as a security against a loan and also the facility of encashment of certificates through banks. Deposits are exempted from Wealth tax too.
Taxability: Investments in NSC gets the benefit under the SEC. 80C of the Income Tax Act. The Income Tax Act provides an exemption from Rs. 100 to Rs. 1, 50, 000 on such investments on yearly basis. The interest on such investment too qualifies for an exemption under the section 80L of the Act.
Post Office Monthly Income Deposit
8% Saving Bonds (Taxable)
Mutual Fund Schemes
Life Insurance Policy
Rajiv Gandhi Equity Saving Scheme