Tips that will Not only help you invest but will also reap tax benefit


Tips that will Not only help you invest but will also reap tax benefit

As FY 2020-21 is about to end , people who have till date kept putting off the tax planning, will now be looking for measures to save tax, and so in hurry they might end up taking wrong decision.One has to make wise decisions. They should select the investment that is suitable for them and yield benefit to them.

 An investment may be good but may not be suitable for you, so choose wisely. Say a good life insurance policy is a waste for individual with no dependent member in a family, or a person who already has one life insurance policy already unless it is under insured.. Tax planning actually is a year long process, but no worry this article is definitely going to help you.

 There are certain tips by which one can avoid tax this financial year legally as our government allows us to do that through a set of sections:

  1. Invest instead of spending under section 80c

There is a bunch of options available under section 80c which actually can be divided into two categories

  1. Invest money
  2. Spend money

Definitely investing is a better option so there are various investment options.

 First is Equity linked savings scheme(ELSS). It’s a mutual fund scheme where minimum 65% is equity it has a lock in period of 3 years with minimum investment of 500 and tax will be applicable only if the long-term capital gain is more than 100000 that to @ of 10%

Second is Sukanya Samriddhi Scheme account which gives interest @ 7.6 % which actually is tax free , with a minimum investment of 1000. Here maximum 2 A/C (1 per girl child) can be opened with a lock in period of 21 years or girl’s marriage whichever is earlier. Amount deposited can be partially withdrawn when the child attains the age of 18 for educational or marriage purpose.

Third is provident public fund with interest rate at the rate of 7.1 % that too again is tax free but has a lock-in period of 15 years with a minimum investment of RS500

 The Fourth is national saving scheme which provide interest rate at the rate of 6.8 % that too tax free with lock in period of 5 years.

Fixed deposit of 5 or more years can also be an investment option but it’s not much beneficial because it gives interest @ 5%-5.5% that too before tax, which is quite less from the above-mentioned options.

But one thing has to be kept in mind that there is a maximum limit to the amount of deduction that can be claimed under this section, that is of 150000.

2.Exemption for immovable property under section 54EC

If an assessee invests the long-term capital gain amount in the specified bonds within 6 months of transfer then the capital gain amount will be exempted to the extent of investment made.   The specified bonds are of

  • national highway authority of India
  • electrification corporation limited
  • power finance corporation limited
  • Indian railway finance corporation limited

 Under this section the assessee can claim maximum deduction of 50 lakh for the bonds acquired during 6-month time.

Assessee cannot transfer bonds or cannot convert it into money within 5 years from the date of acquisition of the bonds if converted then the exemption claimed earlier will be withdrawn and treated as Long term capital gain in the year in which the transfer has taken place

  1. Deduction in respect of interest on electric vehicle loan under section 80 EEB

With the hike in petrol prices electric vehicle is definitely going to be a Win-Win situation for the individual. It is not only going to give you a petrol saving advantage but will also help you save tax .If an individual takes a loan from a bank or a financial institution for purchase of electric vehicle and the loan is sanctioned between 1/4 /2019 to 31/ 3/ 2023 he shall be allowed deduction of maximum 150000 under this section.

4.Deduction in respect of interest on housing loan under section 80EEA

under this section a person who has taken a loan from a bank or a financial institution for acquisition of residential house property with the stamp duty value up to 45 lakhs between 1/4 /2019 to 31/ 3/ 2020 shall be allowed deduction of maximum 150000 in respect of interest on housing loan. Such a deduction is additional to the deduction allowed under section 24 but the deduction should be claimed first under section 24 and the remaining interest should be taken as a deduction under section 80EEA. But one condition to avail this deduction is that the assessee should not own a house property on the date of sanction of a loan.

{ Ku. Archita Nathani is in CA (Final) & undergoing her article-ship  at SSRPN & CO. She can be reached at  }