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Tax Free Income and Investments

November 30, 2016 59221
Investors are always looking for options that generate tax-free income. The good news is that there are plenty of tax free investments in India for investors.

Listed below are tax free investments that meet a variety of needs and financial goals:

Sr No. Best Tax Free Investments Maximum Annual Investment Tax Benefits
1.

Life Insurance

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C and Section 10(D)
2.

PPF (Public Provident Fund)

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C and Section 10(D)
3.

NPS (New Pension Scheme)

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80CCD
4.

Pension

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80CCC
5.

Life Insurance

Rs. 1,50,000 (Rs 1.5 lakhs) Under Section 80C
6.

SCSS (Senior Citizens Saving Schemes)

Single Holding - Rs. 9 Lakhs
Joint Holding - Rs. 15 Lakhs
Under Section 80C

 

  • Life insurance
    Insurance helps individuals meet a variety of financial goals of the individual and his family. All types of life insurance plans including endowment, term, and moneyback qualify for tax benefits on entry and redemption.

    Here are some ways insurance can help achieve life stage goals:

    1. Financial cover against loss of life, which helps the family cope financially in the breadwinner's absence

    2. Child Education

    3. Child Marriage

    4. Buying a House

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Income Tax Section 80C and Section 10(D)

    Investments in ULIPs (unit-linked plans) are another way for individuals to achieve financial goals the tax-free way. ULIPs are linked to markets and more suitable for investors with a medium to high risk profile.

    Tax benefits on ULIPs are similar to those offered on other life insurance plans as per tax structure in India.

  • Public Provident Fund (PPF)
    PPF is a government-sponsored savings and retirement planning direct tax free investment. It is beneficial for individuals without a structured pension plan.

    The interest rate on the PPF is linked to the debt market. Money is locked in for a period of 15 years, although partial withdrawals are permitted, the earliest one being after the sixth year. Redemption proceeds are tax-free in the hands of investors.

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Income Tax Section 80C and Section 10(D)

  • New Pension Scheme (NPS)
    Regulated by the Pension Funds Regulatory and Development Authority or the PFRDA, the New Pension Scheme (NPS) is specifically designed to help individuals save for retirement.

    Any citizen of India in the 18 - 60 years age bracket can participate in it. It is cost effective since fund management charges are low. Money is managed in three separate accounts having distinct asset profiles viz. Equity (E), Corporate bonds (C) and Government securities (G). Investors can choose to manage their portfolio actively (active choice) or passively (auto choice).

    Given the varied options, NPS is beneficial for individuals, with varying risk appetites, looking to set aside money towards retirement.

    Maximum annual investment: Rs 1,50,000 (Rs 1 lakh)

    Tax benefit: Under Section 80CCD

    The aggregate limit of deduction under all the sub-sections of Section 80C, like 80CCD, 80CCC cannot exceed Rs 1.5 lakhs.

  • Pension
    Pension is a form of life insurance that provides for a different need. While protection plans (like term plans) are geared to financially secure the individual's family on death, pension plans aim at providing for the individual and his family if he lives on.

    Maximum annual contribution: Rs 1,50,000

    Tax benefit: Under Section 80CCC

    The aggregate limit of deduction under all the sub-sections of Section 80C, like 80CCD, 80CCC cannot exceed Rs 1.5 lakhs.

  • Deposits
    The 5-year tax-saving bank fixed deposits as also post-office time deposits offer tax free income. They are one of the best tax free investments in India for individuals with low risk appetite looking to save money over the long-term.

    Maximum annual investment: Rs 1,50,000 (Rs 1.5 lakhs)

    Tax benefit: Under Section 80C

  • Senior Citizens Saving Scheme (SCSS)
    The SCSS is a government-sponsored scheme to offer financial security to senior citizens. Individuals over 60 years of age are eligible to invest in the scheme. Investors can make a one-time deposit under subject to the minimum investment amount of Rs 1,000 and a maximum of Rs 15 lakhs (in case of joint holding) and Rs 9 lakhs (single). The lock-in is for 5 years offering interest payable on a quarterly basis with the interest being taxable in the year of accrual and subject to tax deduction at source.

    Tax benefit: Under Section 80C

To learn more about the income tax slabs AY 18-19, click here.

 

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HDFC Life Insurance Company Limited. CIN: L65110MH2000PLC128245, IRDAI Reg. No. 101.

Registered Office: Lodha Excelus, 13th Floor, Apollo Mills Compound, N.M. Joshi Marg, Mahalaxmi, Mumbai 400 011. Email: [email protected], Tel No: 1800-266-9777 (10 am to 7 pm). The name/letters “HDFC” in the name/logo of the company belongs to Housing Development Finance Corporation Limited (“HDFC Limited”) and is used by HDFC Life under an agreement entered into with HDFC Limited.

For more details on risk factors, associated terms and conditions and exclusions please read sales brochure carefully before concluding a sale.

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