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Five tax saving fixed income options up for grab
March, 24th 2015

Tax saving continues to be the most important consideration for most Indians looking to invest, especially when we are nearing 31 March. Indians pay huge proportion of their yearly income in form of taxes to the government and hence are always looking for ways in which they can reduce the amount of tax they pay and increase their post-tax disposable income. In today’s financial world, there are many options in which you can invest and save money on taxes paid.

Like most people, if you are looking for investment schemes that do not entail any risks and would assure you good returns along with tax savings, then there are a number of fixed income plans which enable you to save money on the tax incurred and at the same time also assure great returns in the future. Let us take a look at the five best tax-saving fixed income plans in India which help the common man to save taxes under Section 80C:

1. PPF: PPF stands for Public Provident Fund and it is one of the best options to save taxes. For the current financial year a return of 8.70% is announced. Each year the rate of interest is announced by the government. Other than the return, this investment also allows you to avail deduction in the taxes paid by you every year. The interest is exempt from tax. The rate of interest for a person who falls in the tax bracket comprising of 30% people is about 12.73%. This is quite a good rate of interest and ensures that along with the deduction in taxes, the investor stands to earn a good deal from this kind of a fixed income plan.

A person interested in investing in PPF could get his account opened at a post office or a nationalized bank. The term of PPF is 15 years but you can choose to increase by 5 more years. Also, PPF allows you to get a loan against it after 3 years of the investment and up till 5 years. You can withdraw the money from PPF after the fifth year.

2. Tax Saving Bank Fixed Deposits: Many investors these days prefer to put their hard-earned money as fixed deposit (or FD) in a bank as there are no risks in this as compared to investing in mutual funds and shares which change according to the market conditions. The rate of interest on FDs varies from one bank to another. These FDs have a tenure of five years. Most banks allow you to book an FD online. These FDs are paperless, so you do not need to safeguard your FD certificate to claim it in these banks.

3. National Savings Certificate: Known as NSC, this is a popular investment vehicle among people who are looking for some long term plan and have not reached the maximum limit of 1.5 lakhs for savings that has been set by the government. You can invest any amount on an NSC, the minimum being Rs. 100. Another benefit you can reap from investing in NSC is that the income one earns is eligible for tax reduction. Rate of interest on five years NSC is 8.5% and for ten years NSC is 8.8%.

4. Senior Citizen Saving Scheme (SCSS): This is a saving scheme that caters exclusively to the senior citizens who are above the age of 60. They are offered a rate of 9.2% per annum and the interest paid under this scheme enjoys tax deduction, provided the interest amount does not exceed Rs. 10,000. The maturity period for this plan is 5 years and investors can further extend it for another 3 years.

5. Post Office Deposit Schemes: The post offices in India provide the citizens with a five year deposit scheme that helps them to save the money spent on taxes and at the same time ensure great returns. The interest rate that is provided on these deposit schemes is 8.5%. The interest on this deposit is calculated and compounded every year. Post offices do not deduct any TDS from the schemes but these are subject to tax.

Try these five tax-saving fixed income plans available in India which are time-tested and have proven to be beneficial to multitudes of investors.

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