Scrambling for tax-saving investments? Here are a few simple options

There are several options which are available for an individual to look at when it comes to saving on tax liability. The choices also swing from the most conservative risk and low return instruments to high risk and high return investment vehicles. Here let's briefly discuss a few of them.

Public Provident Fund:
One can open a PPF in a bank or a post office. The maximum limit is Rs 1.5 lakh per annum and this can be invested as a one-go shot or in systematic instalments. It is a traditional and friendly investment option for a small saving investor. The best part of PPF is that the interest rates are linked to the prevailing bond yields in the secondary market. This is to ensure that the PPF returns are in line with the market rates.

Tax saving FDs:
As the name spells, these FDs offer tax savings, u/s 80C. One should note that the FD interest is taxable at an individual's tax slab rate. They come with a safety tag, but the returns are lower and in some years, lesser than the inflation.

National Savings Certificate:
Suitable for conservative investors fetching an avarge return of around 8 to 8.5% per annum with a 5 or 10 year lock-in period. PPF scores over NSC in the sense that interest from NSC are taxable. Tax savings can be claimed u/s 80C.

ELSS:
It is an instrument for long-term capital appreciation. These funds are offered by the mutual funds registered with the securities and exchange board of India and invest the pooled amount into equities based on the investment objective and the prevailing market opportunities. Equity Linked Savings Scheme have the lowest lock-in period of 3 years among all the 80C options. Also, the capital gains realized after 3 years are tax-free, as they are long term in equities. One must select funds based on the fundamental strength, portfolio risk, fund manager and the fund's track record before making a plunge into it.

Life insurance premium:
Amount paid towards insurance premium can be included in 80C to the extent of Rs 1.5 lakh. But the point to be noted here is that the deduction will be allowed only for premiums up to a maximum of 10% of the sum assured for policy issued on or after April 1, 2012. Policies should be selected purely for life cover and protection, instead of investment.

RGESS:
Rajiv Gandhi Equity Savings Scheme was introduced in the FY 2012-13 for first time equity investors. They are called "New Retail Investors", who haven't had a demat account prior to 23rd November 2012, or had one but never traded and with less than Rs 12 lakh income per annum. They are eligible to save tax through this new route under section 80CCG. They can avail 50% of the invested amount as tax benefit, with investment amount being capped at Rs 50,000 p.a. (or tax savings limited at Rs 25,000). Investors can adopt direct equity route or the mutual fund route based on the awareness, knowledge, time availability and convenience. There are certain RGESS complaint stocks and MFs which can be carefully chosen.

Home loan principal repayment:
Principal payment on housing loan qualifies for deduction under 80 c.b). The deduction can be claimed up to Rs 1.5 lakh.

The writer is national head, distribution, Geojit BNP Paribas