Within the fiscal yr 2023-24, employed people can select between the previous tax system and the brand new one. The previous tax regime gives deductions and exemptions, whereas the brand new one has decrease tax charges however fewer deductions. It is necessary to match your tax liabilities below each programs earlier than deciding. If the previous system is best for you, it is vital to select the appropriate tax-saving choices.
As per an ET report, beneath are 4 tax-saving funding choices that not solely enable you cut back earnings tax but additionally present returns which are utterly tax-free. Bear in mind, these advantages are unique to people who select the previous tax regime.
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Public Provident Fund (PPF)
Underneath Part 80C, investing within the Public Provident Fund (PPF) permits people to decrease their taxable earnings. This scheme falls below the “exempt-exempt-exempt” (EEE) class, which means traders can declare deductions on their invested quantity, they usually do not need to pay tax on the curiosity earned or the maturity quantity. The PPF scheme is very safe because it carries a sovereign assure.
The rate of interest of PPF is revised by the central authorities each quarter. For the April-June 2024 quarter, the PPF gives an rate of interest of seven.1% every year.
The PPF account has a lock-in interval of 15 years, ranging from the top of the monetary yr by which the funding is made. From the third to the sixth monetary years after opening the account, people can avail themselves of a mortgage facility. Untimely withdrawal is allowed from the seventh monetary yr onwards, topic to particular situations. Moreover, below sure circumstances, people can go for untimely closure of their PPF account.
A PPF account will be opened both with a publish workplace or a financial institution. A person can open just one PPF account of their title, with the minimal and most funding being Rs 500 and Rs 1.5 lakh, respectively, in a monetary yr.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) is a part of the federal government’s “Beti Bachao, Beti Padhao” initiative, designed as a financial savings scheme for lady youngsters. It permits mother and father to put money into their daughter’s training or marriage whereas having fun with earnings tax advantages. Much like the PPF, the SSY account follows the EEE tax standing, which means the invested quantity, curiosity earned, and maturity quantity are all tax-exempt.
With a sovereign assure, the SSY gives top-notch security requirements. The federal government critiques the scheme’s rate of interest quarterly. At present, for the quarter ending June 30, 2024, the SSY gives a sexy rate of interest of 8.2%.
The scheme has a lock-in interval of 21 years from the account’s opening date, with provisions for untimely withdrawal below sure situations.
A Sukanya Samriddhi Yojana account will be opened by a guardian within the title of a lady baby, offered she is below 10 years previous. The account will be established at both a financial institution or a publish workplace, with contributions starting from a minimal of Rs 250 to a most of Rs 1.5 lakh per monetary yr. The guardian oversees the account till the lady reaches 18 years of age.
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Staff Provident Fund (EPF) and Voluntary Provident Fund (VPF)
Salaried people enrolled within the Staff’ Provident Fund (EPF) system are required to put aside 12% of their wage for his or her EPF account, with their employer contributing the identical quantity. Contributions made by the worker to the EPF are eligible for tax deduction below Part 80C of the Revenue Tax Act. If a person desires to make further contributions past the obligatory 12%, they’ll go for the Voluntary Provident Fund (VPF), with laws governing each EPF and VPF contributions being similar.
Managed by the federal government, the EPF scheme gives the very best security requirements. The rate of interest for the EPF in 2023-24 is about at 8.25%.
The scheme has a lock-in interval till retirement age, with provisions for untimely withdrawals below sure circumstances, corresponding to larger training bills, marriage, or medical remedy.
The EPF scheme enjoys an EEE (Exempt-Exempt-Exempt) tax standing, offered sure situations are met. Nevertheless, ranging from the fiscal yr 2021-22, if an worker’s contributions to EPF and VPF accounts exceed Rs 2.5 lakh in a fiscal yr, the curiosity earned on the surplus quantity turns into taxable. Moreover, from the fiscal yr 2020-21, if the employer’s mixed contributions to EPF, Nationwide Pension System (NPS), and superannuation funds exceed Rs 7.5 lakh yearly, the excess quantity is taxable within the fingers of the person recipient. Curiosity, dividends, and different earnings on these extra contributions are additionally topic to taxation. Nonetheless, the maturity quantity of the EPF scheme stays tax-exempt.
Subsequently, so long as the contribution limits set by each the worker and the employer should not exceeded, the EPF retains its EEE tax standing.
