Rajkotupdates.news: Tax Savings pf fd and Insurance Tax Relief: Savings account interest rates have been on a downward trend for a long time, so, in the current scenario, FD (Fixed Deposit) is the best tax saving instrument you can use to keep your money safe.
You can get good returns along with them. This article will look at some essential things that every investor must keep in mind while making investment decisions.
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What are the tax savings?
Savings account interest rates have been on a downward trend for a long, so, in the present scenario, FDs are the best tax saving instrument you can use for the safe keeping of your money. You can get good returns on them as well. In this article, we will see some important points that every investor must remember while making an investment decision.
It is primarily used to risk diversification and portfolio management when the economy is unstable. Its main feature is that it offers a high-interest rate for the deposited sum for a fixed time.
There are two types of FD (Fixed deposit):
- You might be aware that you can save taxes with your FD. It would help if you chose a tax-saving FD over a standard term deposit account because many banks offer tax rebates and substantial interest rate benefits on their FDs. You need to make sure that before starting an Fd, you should check if you are eligible for any tax benefit and its maximum amount.
- For four years or less, the interest on provident funds is exempt from income tax. The tax relief for other plans such as endowment and pension fund/superannuation funds is limited to only three years. These instruments are popular with employees because of the flexibility that they offer. The money can be withdrawn before maturity and whenever an employee wants it.
Rajkotupdates.news : tax saving pf fd and insurance tax relief
The tax benefit on FDs comes into effect from the financial year 2018-19. Taxpayers can save up to Rs 1.5 lakh under Section 80C of the Income Tax Act and another Rs 50,000 under Section 80C (1B). However, this amount must be invested in different instruments, including mutual funds, PPF, NSCs, etc.
The government has added new instruments to the list of allowed investments under Section 80C. With these new instruments, investors will have more options to save their money without worrying about tax implications.
To encourage savings among people and promote prudent investment in government securities and other eligible securities on a systematic basis, the finance ministry has allowed a deduction from taxable income on investments made till March 31, 2021, in any one year up to an aggregate limit of Rs 1.5 lakh per annum by an individual taxpayer in specified notified schemes/schemes approved by RBI (Reserve Bank of India) for this purpose.
7 Investment you can save tax
- Public Provident Fund(PPF)
- Employee provident fund(EPF)
- Fixed Deposit (FD)
- National Pension System(NPS)
- Life insurance
- Sukanya samriddhi yojana
1. Public Provident Fund(PPF)
A public provident fund is a government-sponsored scheme that allows you to invest in it for 15 years. The interest rate offered by PPF is comparatively lower than other investment options available in the market, but it boasts of safety. So it’s an attractive option for those who want to keep their money safe and earn a low rate of interest on it.
2. Employee provident fund(EPF)
An employee provident fund or EPFO is an organization that provides retirement benefits, pension, etc., for its members. You can invest in EPFO schemes if you are working with a company that has signed an agreement with EPFO, i.e., EPS or EPS-i plan (it depends upon which industry you belong to). These schemes provide tax benefits under section 80C and Section 80CCD(1B). You can also invest up to Rs 1 lakh under this scheme per annum, but remember this amount will not be eligible for deduction under Section 80C of Income Tax Act, 1961, i.e., there will be no tax benefit on this investment (unless you have paid tax
3. Fixed Deposit (FD)
Fixed deposits are safe investments as you get assured returns on your money, but they are also taxable per income slab rate under Section 80C of the Income Tax Act, 1961. FDs are considered debt instruments, so returns are taxed at a marginal tax rate (30%). Interest earned on FDs up to Rs 50,000 will be exempt from tax if invested in bank FDs after March 31, 2020, while interest earned on other FDs will be taxed at a marginal tax rate (30%).
4. National Pension System(NPS)
The National Pension System (NPS) is a government-sponsored pension scheme launched in 2004. The method offers several benefits, such as easy access to your money, flexibility in terms of investment options, and tax-free returns. As an NPS subscriber, you can invest in any of these four schemes: Tier 1, Tier 2, Tier 3, and Tier 4.
5. Life insurance
Life insurance provides financial protection against death or disability. It also helps in solving economic problems in case of sudden death or permanent disability of an individual. Depending on your requirement and budget, you can choose term plans or whole life plans. A term plan gives protection only for a specific period, whereas an entire life plan provides coverage throughout an individual’s lifetime.
6. Sukanya samriddhi yojana
Sukanya Samriddhi Yojana is a long-term savings scheme where the government contributes Rs 1,000 per annum to a girl child’s account until she reaches 18 years of age irrespective of her educational qualification or occupation after attaining majority age.
Tax Saving FD and Insurance Tax Relief
A fixed deposit (FD) is a financial instrument provided by banks or NBFCs which offers investors a higher rate of interest than regular savings account until the given maturity date. The interest on FDs is taxable under the head “Income from other sources.”
However, if the interest income exceeds Rs 10,000 in a year, it will be taxed at 20% along with your other payment. So, for example, if you invested Rs 40,000 for three years in an FD and earned an interest of 8%, then you would get Rs 3220 as interest every year.
Besides tax liability, there are several other benefits of investing in an FD, such as:
1. Liquidity:
You can withdraw money any time between two months to three years of the investment period without any penalty or documentation charges.
2. Safety:
Your money is safe from misuse and fraud as it is deposited in the bank’s custody only with proper documentation.
3. Loan facility:
In case you need some extra cash during your investment period, you can ask for a loan against your deposit amount without paying any interest on that amount until the maturity period ends; however.
How do FDs help in tax savings?
FDs are considered one of the best investment options to save on taxes. Here’s how:
Interest earned on FDs is exempt from income tax under Section 80C of the IT Act 1961. If you invest Rs 1 lakh and earn Rs 8,000 interest per annum, this amount will be exempt from income tax. So, if you have an annual income above Rs 5 lakhs, you can save up to Rs 30000 annually with this exemption!
You don’t need too much time to start investing with FDs as they are available for short-term and long-term investments. If you plan for short-term investments, then FDs offer higher returns compared to other investment options such as gold or real estate, etc., whereas for
In the current scenario, tax-saving fixed deposits are a popular investment option for investors. The tax benefit on FD is as follows:
1. Interest earned on an FD is exempt from Income Tax under Section 10(20) of the Income Tax Act.
2. Interest earned on an FD is exempt from Wealth Tax under Section 3(34) of the Wealth Tax Act.
3. Interest earned on an FD is also exempt from Securities Transaction Tax (STT).
Exemption on the Premium Paid for Medical Insurance Policies
Rajkotupdates.news : tax saving pf fd and insurance tax relief: The following table shows how tax relief is calculated on insurance:
| Description | Medical Insurance Paid for | Total Deduction of Tax under Section 80 D | |
| Self, Spouse as well as Dependent Children | Parents (dependents or not) | ||
| No One has reached 60 years of age | 15, 000 | 15, 000 | 30, 000 |
| Assessee and family are under 60 years while parents are aged above 60 years | 15, 000 | 20, 000 | 35, 000 |
| The assessee, as well as his parents, are more than 60 years of age | 20, 000 | 20, 000 | 40, 000 |
FAQ of tax saving insurance tax relief
What is FD?
FD stands for Fixed Deposit. This is a type of investment made through banks. It is considered to be the safest form of investment because it offers interest rates that are fixed for some time. FDs are useful for investors who want to earn some interest on their money but do not want to risk.
What is insurance tax relief?
Tax relief on insurance premiums is available under section 80C of the Income Tax Act, 1961. This deduction can be availed by salaried employees and individuals having income from other sources like rental income or business income. The maximum amount that can be claimed as a deduction in one financial year is Rs 1 lakh. This deduction can also be used with other deductions under section 80C, such as medical insurance premium, medical expenditure, etc.
How much can be saved with Insurance Tax Relief?
The amount saved through Insurance Tax Relief depends upon the amount paid towards premium and the tax slab of the individual/salaried employee who has opted for this facility from their employer. For example: If an individual’s taxable income is Rs 10 lakhs, then they will have to pay 30% tax (as applicable) on their total income, which includes
Tax Saving Investments
1. Tax Saving life insurance premium
Life insurance premiums paid for life insurance policies are eligible for deduction under Section 80C of the Income Tax Act, 1961. Therefore, buying a term insurance plan instead of a whole life plan is advisable as it reduces your tax liability by deduction under Section 80C. Also, you can claim a deduction on premium paid for Terminal Illness Benefit (TIB) riders and top-up options like Child Rider or Accidental Death Benefit rider.
You are eligible for up to Rs 1 lakh deduction on TIB or Accidental Death Benefit rider per year or the total premium paid, whichever is lower according to Section 80C(2)(xvii). The dividend payable on Child Riders ranges from Rs 25000 to Rs 50000, but this amount will increase if you opt for higher coverages or if you are above 55 years old when buying a child rider
4. investment in The National Pension Scheme
Investment in The National Pension Scheme (NPS) is an excellent tax-saving option for senior citizens. NPS is a retirement savings scheme launched by the Government of India to provide a decent and dignified life to senior citizens. The subscriber can avail of the NPS investment under Section 80C of the Income Tax Act, 1961.
Final Thought
FD can be a great option if you are looking for an excellent place to invest your hard-earned money. This allows you to save money at higher interest rates than your regular savings account.
So, I hope that’s what you’re here for? It has succeeded.