Best tax-saving options

In an online chat with Get Ahead readers on February 6, Anil Rego, CEO, RightHorizons, answered their queries on saving tax.

Unedited excerpts:

hitansh: There are many misconceptions about bank fixed deposits in the minds of investors. Many think that up to Rs 10,000 interest from bank deposits is tax-free, as announced in the budget two years ago.

Anil Rego: If the interest from Bank FD is less than Rs. 10 K then the TDS is not deducted by the bank. However while computing total income for the purpose of tax one has to consider interest from Bank FD even if it is less than Rs. 10,000/-

haresh: Please, advice for better retirement plan.

Anil Rego: INvestment for Retirement will depend on various factors like your age and also risk apetite. However one should have a well diversified portfolio composing of Equity Shares, Equity Mutual Funds, Debt Mutual Funds, Bonds, EPF/PPF/NPS and other Debt instruments. A diversified portfolio help to mitigate risk and enhance Risk Adjusted Returns

Animesh Das: My father is a senior citizen & earns around 12 lacs per year from bank fd. Can you please suggest some tax saving options.

Anil Rego: Senior citizens of the age 60 years & above have a basic exemption limit of 2.50 lakhs. Any income above this limit is taxable in nature & deduction can be claimed u/s 80c & 80d. You can consider investing in tax free bonds & debt funds. Interest received from tax free bonds are not taxable. In case of debt funds you can claim the benefit of indexation.

Kalpathy Viswanathan: Is it possible to invest more than 1 lac in PPF per financial year. I am aware that under 80C I will get only 1 lac towards deduction

Anil Rego: The ceiling on PPF contribution for an individual is Rs 1 lakh per financial year.

Mohitkumar Kalaria: Hello sir, my question is regarding section 80D. My wife is salaried, so if she buys a family floater plan for medical insurance of herself, mine and my father-mother, then how much maximum tax benefits can she get?

Anil Rego: Maximum benefit that can be claimed u/s 80d for children, spouse & self under a family floater would be Rs. 15,000. If the individual is paying the premium for parent whether dependent or not, it is another 15k & if the parent is a senior citizen (i.e age 60 & above) the benefit would be 20k.

kaushal: what about SENIOR CITIZEN'S SAVING SCHEME which remains the best way for retirees to save tax, though the Rs 15 lakh investment limit is a damper.

Anil Rego: Yes, it is one of the good avenue for the retirees. However considering the maximum limit of Rs. 15 Lacs one can also consider other Debt avenues to park the retirement corpus

jinny: While the returns from the E class (equity) funds are in line with the market returns, those from the G class (gilt) funds are quite a disappointment.

Anil Rego: Gilt/Debt funds invest in securities/instruments like Bank FD/Commercial Paper/Certificate of Deposits/Bonds etc and hence the returns on any debt product is not related to the returns on equity markets. However in order to compare returns of a specific fund you can compare the same among its peers and benchmark index

Jeswal: Do ELSS FUNDS has the potential for high returns, wide choice of funds and flexibility make these funds a good tax-saving option for equity investors?

Anil Rego: Since ELSS invest in equity markets so the returns of the fund are linked to market returns and hence they do have a potential of earning higher returns. However one must be cautious because the risk category of such investments would be in the range of Moderate - High

shahin: There is need to pay tax if TDS has been deducted by the bank.

Anil Rego: Banks deduct TDS if interest income earned on fixed deposits exceeds Rs10,000. Tax deducted at source (TDS) would be at 10% provided you have submitted your PAN to the bank. The difference in tax has to be paid which is to be computed based on tax bracket you fall under.

Deepak N: I am planning to invest in PPF due to tax saving, how much should i invest to get the benefits of tax saving

Anil Rego: Investment in PPF is deductible u/s 80 C. Maximum amount of deduction which can be claimed u/s 80 C is 1 Lac. Hence maximum amount which can be invested in PPF is Rs. 1 Lac for tax purpose

rittika negi: It is a good idea to invest a large sum in the equity option at one go or opt for the liquid or debt fund instead.

Anil Rego: Investing a large sum in equity at one go will not be advisable. Rather you can choose a Debt/Liquid fund from where a regular amount be transferred to Equity funds in form of Systematic Transfer Plan (STP)