So it's that time of the year again, and I need to invest Rs. 1 Lakh in insurance, get Rs. 20,000 worth of bonds, and Rs. 15,000 worth of health insurance. Can people please suggest, from experience, which methods are the most secure while giving adequate returns with a minimum lock-in period? Please suggest for all three heads - and also let me know if I missed anything.
Regards,
Sid
From India, Gurgaon
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672Regards,
Sid
From India, Gurgaon
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Hi Sid,
Thank you for your message. I appreciate the information you shared about PPF and single premium policies. It seems there is no limit for these types of investments, allowing you to contribute the entire amount of Rs. 1 Lakh, which is tax-deductible, and receive a bond of Rs. 20,000.
I believe the mediclaim is a separate entity from the Rs. 1 Lakh limit, but it's essential to confirm this for accurate tax planning. By deducting Rs. 1,20,000, including investments in these products, you can maximize your tax benefits.
Regarding the term plan, your friend's advice on segregating risk cover investment and growth fund investment is intriguing. It's crucial to understand the benefits and implications of such a strategy. I wonder if you or anyone else has further insights on this topic.
Thank you once again for reaching out. Your proactive approach to financial planning is commendable.
Best regards,
Sid
From India, Gurgaon
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Thank you for your message. I appreciate the information you shared about PPF and single premium policies. It seems there is no limit for these types of investments, allowing you to contribute the entire amount of Rs. 1 Lakh, which is tax-deductible, and receive a bond of Rs. 20,000.
I believe the mediclaim is a separate entity from the Rs. 1 Lakh limit, but it's essential to confirm this for accurate tax planning. By deducting Rs. 1,20,000, including investments in these products, you can maximize your tax benefits.
Regarding the term plan, your friend's advice on segregating risk cover investment and growth fund investment is intriguing. It's crucial to understand the benefits and implications of such a strategy. I wonder if you or anyone else has further insights on this topic.
Thank you once again for reaching out. Your proactive approach to financial planning is commendable.
Best regards,
Sid
From India, Gurgaon
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The budget is silent on 20K (80CCF) on infrastructure bonds. Let us wait and see for the notification. Hope the govt will not change the provisions made in 2011-12 budget. Pon
From India, Lucknow
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From India, Lucknow
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Dear Mr. Roy,
The minimum lock-in period for Section 80C is only for Mutual Funds (Three Years), and the maturity value differs subject to market fluctuations.
The maturity value of any ULIP also depends on market fluctuations.
Post Office NSC provides assured returns, and its annual interest also attracts tax exemption every year under Section 80C. However, the minimum lock-in period is 6 years.
Receipts for Children's School/College Fees can also be used for Section 80C.
Normal Insurance Premium receipts can also be used for Section 80C.
The principal amount of a Housing Loan is also eligible for exemption under Section 80C.
Under Section 80CCF (Long-Term Infrastructure Bonds) for this financial year, we can invest Rs. 20,000/- in addition to Rs. 100,000/- under Section 80C. Please note that the investment of Rs. 20,000/- under Section 80CCF (Long-term Infra Bonds) is not available for FY 2012-13.
Health Insurance and Mediclaim Policy for self and family amounting to Rs. 15,000/- are eligible for deduction under Section 80D. If there are any physically challenging dependents, the deduction can be up to Rs. 20,000/-.
Donations made to CM/PM Relief Fund will receive 100% tax exemption under Section 80G. Donations to any Charitable Trust will receive 50% tax exemption under Section 80G.
Let us expect more insights from our knowledgeable members on this subject.
From India, Kumbakonam
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The minimum lock-in period for Section 80C is only for Mutual Funds (Three Years), and the maturity value differs subject to market fluctuations.
The maturity value of any ULIP also depends on market fluctuations.
Post Office NSC provides assured returns, and its annual interest also attracts tax exemption every year under Section 80C. However, the minimum lock-in period is 6 years.
Receipts for Children's School/College Fees can also be used for Section 80C.
Normal Insurance Premium receipts can also be used for Section 80C.
The principal amount of a Housing Loan is also eligible for exemption under Section 80C.
Under Section 80CCF (Long-Term Infrastructure Bonds) for this financial year, we can invest Rs. 20,000/- in addition to Rs. 100,000/- under Section 80C. Please note that the investment of Rs. 20,000/- under Section 80CCF (Long-term Infra Bonds) is not available for FY 2012-13.
Health Insurance and Mediclaim Policy for self and family amounting to Rs. 15,000/- are eligible for deduction under Section 80D. If there are any physically challenging dependents, the deduction can be up to Rs. 20,000/-.
Donations made to CM/PM Relief Fund will receive 100% tax exemption under Section 80G. Donations to any Charitable Trust will receive 50% tax exemption under Section 80G.
Let us expect more insights from our knowledgeable members on this subject.
From India, Kumbakonam
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Hi Sid,
Thank you for reaching out. I have decided to get a term insurance. I have one more question related to this - does the death benefit of the term insurance help in securing a bigger loan when it comes to home loans?
Regards,
Bhaskar
From India, Gurgaon
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Thank you for reaching out. I have decided to get a term insurance. I have one more question related to this - does the death benefit of the term insurance help in securing a bigger loan when it comes to home loans?
Regards,
Bhaskar
From India, Gurgaon
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Dear Mr. Roy,
The Term Insurance is entirely different. Normally, term insurance is meant for death benefit coverage only and not for any other purpose.
LIC will secure their Housing Loans by adding an Insurance Policy for an amount equivalent to the Home Loan in addition to the Original House documents. However, for Banks, they will have the Original House Document as their security.
As the term policy is normally for one year and only pays out upon death, the benefits will be given to the legal heir/Nominee. Furthermore, it will lapse until we pay further premiums, and it will not secure us more home loan.
Let us expect some experts' reply on this subject.
From India, Kumbakonam
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The Term Insurance is entirely different. Normally, term insurance is meant for death benefit coverage only and not for any other purpose.
LIC will secure their Housing Loans by adding an Insurance Policy for an amount equivalent to the Home Loan in addition to the Original House documents. However, for Banks, they will have the Original House Document as their security.
As the term policy is normally for one year and only pays out upon death, the benefits will be given to the legal heir/Nominee. Furthermore, it will lapse until we pay further premiums, and it will not secure us more home loan.
Let us expect some experts' reply on this subject.
From India, Kumbakonam
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Hi Bhaskar,
You are correct - I confirmed this with my home loan manager. He said that usually banks have their own partnerships with insurance companies and they can get a term cover for the loan amount, and in case of the borrower's death, then the loan amount is paid by the insuring company. Somehow, they won't consider a term insurance taken individually - which is probably some bank policy.
So basically, any individual term insurance will not get any home loan benefits but just get you risk cover. For example, I am getting a risk cover of 1.5cr for a yearly premium of Rs. 57,000 from LIC. A friend suggested that I go with LIC even though the premiums are on a higher side - simply because they are more trustworthy as a company compared to all the private insurance companies that have mushroomed. He says LIC claims are handled better, and the company creates no hassles if everything was mentioned properly in the policy. For example, if you smoke and you don't mention it - that could be a problem - if, say, you die of lung cancer. Both accidental and natural death have the same assured amount benefit.
Regards,
Sid
From India, Gurgaon
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You are correct - I confirmed this with my home loan manager. He said that usually banks have their own partnerships with insurance companies and they can get a term cover for the loan amount, and in case of the borrower's death, then the loan amount is paid by the insuring company. Somehow, they won't consider a term insurance taken individually - which is probably some bank policy.
So basically, any individual term insurance will not get any home loan benefits but just get you risk cover. For example, I am getting a risk cover of 1.5cr for a yearly premium of Rs. 57,000 from LIC. A friend suggested that I go with LIC even though the premiums are on a higher side - simply because they are more trustworthy as a company compared to all the private insurance companies that have mushroomed. He says LIC claims are handled better, and the company creates no hassles if everything was mentioned properly in the policy. For example, if you smoke and you don't mention it - that could be a problem - if, say, you die of lung cancer. Both accidental and natural death have the same assured amount benefit.
Regards,
Sid
From India, Gurgaon
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Post budget 2011-12, under the New Pension Scheme, contributions to NPS up to 10% of Basic + DA under CTC debit (Employer Side) are tax-exempt. This exemption is outside the purview of 80 CCE, i.e., this exemption is in addition to 1.00 L u/s 80C.
From India, Lucknow
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From India, Lucknow
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Dear Mr. Pon The Tax exemption is for employer, i.e., for the corporate companies. It is not on any employee and one cannot show it as exemption under any section of IT Act.
From India, Kumbakonam
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From India, Kumbakonam
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Dear Pon Sir,
Is the NPS for private employees or only government employees?
Dear Sid,
Hi, how are you?
You can avail the benefit of only (100000 - Your PF Contribution) under Sec 80C.
Under Sec 80C, for heads, all members have already mentioned the options except the most secure BANK FIXED DEPOSIT for 5 years. Take a bank FD of any nationalized bank, e.g., SBI, for 5 years, and that amount is exempt under Sec 80C.
Under Sec 80D, Medical Insurance Premium, you can claim a total of 35000 (15000 - Self Dependents, 20000 - for parents if parents are senior citizens, else 15000 for parents if they are not senior citizens; now, age above 60 is a senior citizen).
Sec 80CCF infra bonds.
What about HRA (House Rent Exemption)? What are you doing?
And one piece of advice,
Rather than just investing blindly to save tax, it is better to pay tax. In my office, many employees just leave the investments like that. They say, for saving 3000Rs, if I need to invest 30000, I better not invest. That is also very bad. So plan your financials as per your need and requirement so that tomorrow you may not feel that it would have been better if you had paid the tax, rather than locking the capital in some funds, MF, etc., especially MFs have risks.
From India, Madras
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Is the NPS for private employees or only government employees?
Dear Sid,
Hi, how are you?
You can avail the benefit of only (100000 - Your PF Contribution) under Sec 80C.
Under Sec 80C, for heads, all members have already mentioned the options except the most secure BANK FIXED DEPOSIT for 5 years. Take a bank FD of any nationalized bank, e.g., SBI, for 5 years, and that amount is exempt under Sec 80C.
Under Sec 80D, Medical Insurance Premium, you can claim a total of 35000 (15000 - Self Dependents, 20000 - for parents if parents are senior citizens, else 15000 for parents if they are not senior citizens; now, age above 60 is a senior citizen).
Sec 80CCF infra bonds.
What about HRA (House Rent Exemption)? What are you doing?
And one piece of advice,
Rather than just investing blindly to save tax, it is better to pay tax. In my office, many employees just leave the investments like that. They say, for saving 3000Rs, if I need to invest 30000, I better not invest. That is also very bad. So plan your financials as per your need and requirement so that tomorrow you may not feel that it would have been better if you had paid the tax, rather than locking the capital in some funds, MF, etc., especially MFs have risks.
From India, Madras
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[QUOTE=boss2966;1812822]Dear Mr. Pon,
The tax exemption is for the employer, i.e., for the corporate companies. It is not applicable to any employee, and one cannot claim it as an exemption under any section of the IT Act.
Employers deduct this opted percentage of basic pay + DA (maximum 10%) from your CTC and deposit it into the NPS fund. This amount will not be shown as income under your income head. This policy was introduced in our company in the fiscal year 2012-13.
Pon
From India, Lucknow
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The tax exemption is for the employer, i.e., for the corporate companies. It is not applicable to any employee, and one cannot claim it as an exemption under any section of the IT Act.
Employers deduct this opted percentage of basic pay + DA (maximum 10%) from your CTC and deposit it into the NPS fund. This amount will not be shown as income under your income head. This policy was introduced in our company in the fiscal year 2012-13.
Pon
From India, Lucknow
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Thank you, Mr. Pon, for sharing useful information. Whoever joined the Indian Air Force on or after 2003 (the exact starting period is not confirmed), the Government has introduced this NPS. I hope this is the same as what I feel.
From India, Kumbakonam
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From India, Kumbakonam
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@PON Sir,
Deductions from Employee Salary for PF/EPF/CPF/NPS are never shown as income. The only thing is these deductions from salary are eligible for exemption under Sec 80C. I did not get your point. Do you mean to say that before NPS was introduced in your company, you did not have EPF/PF? Or even if you had EPF/PF, then those deductions were not eligible for exemption under Sec 80C.
From India, Madras
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Deductions from Employee Salary for PF/EPF/CPF/NPS are never shown as income. The only thing is these deductions from salary are eligible for exemption under Sec 80C. I did not get your point. Do you mean to say that before NPS was introduced in your company, you did not have EPF/PF? Or even if you had EPF/PF, then those deductions were not eligible for exemption under Sec 80C.
From India, Madras
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Dear Ravi,
The EPF/CPF/PF will attract tax benefits under Sec 80C of the IT Act. However, NPF is something different. It will be deducted from our salary in the name of NPS, and its accumulation will form a corpus. From the interest earned from the corpus fund, pensions will be paid to the employees after reaching the retirement age. I hope that this NPS deduction has been considered in our income tax calculations starting from 2012-13.
From India, Kumbakonam
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The EPF/CPF/PF will attract tax benefits under Sec 80C of the IT Act. However, NPF is something different. It will be deducted from our salary in the name of NPS, and its accumulation will form a corpus. From the interest earned from the corpus fund, pensions will be paid to the employees after reaching the retirement age. I hope that this NPS deduction has been considered in our income tax calculations starting from 2012-13.
From India, Kumbakonam
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Thank you everyone,
This has been very useful. What I have finally done is divided the necessary investment into 5 parts:
1. LIC insurance - 20K per year
2. Max ULIP plan - 20K per year
3. Max Pension plan - 10K per year
4. LIC term insurance for 1.5cr - 57K per year
5. Bonds - 20K
I'll look into NPF if it can add some more deductions. I decided on the term insurance because the returns from these insurance policies don't make much sense if we take inflation into account. But I do need risk cover for my family, which is why the major chunk of the investment goes into that.
Thanks everyone for putting in their cents - I am sure it will help all those who land up here for tax-saving advice.
Regards,
Sid
From India, Gurgaon
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This has been very useful. What I have finally done is divided the necessary investment into 5 parts:
1. LIC insurance - 20K per year
2. Max ULIP plan - 20K per year
3. Max Pension plan - 10K per year
4. LIC term insurance for 1.5cr - 57K per year
5. Bonds - 20K
I'll look into NPF if it can add some more deductions. I decided on the term insurance because the returns from these insurance policies don't make much sense if we take inflation into account. But I do need risk cover for my family, which is why the major chunk of the investment goes into that.
Thanks everyone for putting in their cents - I am sure it will help all those who land up here for tax-saving advice.
Regards,
Sid
From India, Gurgaon
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I don't know, but tomorrow I will post a document about NPS. The date is 01-01-2004. Please refer to this sample order: https://docs.google.com/viewer?url=h...&pli=1
For our organization, a government entity, we won't have CPF; we will have NPS only. Therefore, it is either NPS, EPF, or CPF, not all. Please correct me if I am wrong. I am an accountant looking after all finance and accounting matters. We received a similar letter from headquarters regarding the implementation of NPS.
From India, Madras
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For our organization, a government entity, we won't have CPF; we will have NPS only. Therefore, it is either NPS, EPF, or CPF, not all. Please correct me if I am wrong. I am an accountant looking after all finance and accounting matters. We received a similar letter from headquarters regarding the implementation of NPS.
From India, Madras
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Look at this link also New Pension Scheme (India) - Wikipedia, the free encyclopedia. For us, it's compulsory; for others, it's only tier 2. We have tier 1 compulsory and won't have PF or CPF henceforth.
From India, Madras
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From India, Madras
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It's not clear what the maximum contribution per year is. In some places, it says a maximum of 12,000 per year, and on the [ICICI Bank page](http://www.icicibank.com/Personal-Banking/account-deposit/New-Pension-System/index.html), it says there is no maximum. Are these deductions over and above the 1,20,000 allowed via the two sections of insurance and bond? How much per year are we allowed to put in?
Regards,
Sid
From India, Gurgaon
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Regards,
Sid
From India, Gurgaon
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Dear Sid,
Only upto 10% of your Basic + DA is allowed for tax exemption.
Post the Union Budget 2011-12 NPS has been given a special tax treatment wherein NPS contributions of the
Employer have been taken out of the purview of Sec 80CCE. Meaning whereby that the employer’s contribution
to NPS can be debited to CTC of the Employee (shall not exceed the limit of 10% of Basic Salary). In summary,
contribution by employee from CTC via mode “CTC Debit” (Employer’s contribution) is eligible for additional
deduction from Gross Taxable Income subject to a cap of 10% of Basic Salary.
Government has proposed that the investments in NPS be made EEE (Exempt at deposit, appreciation and
withdrawal) under the Direct Tax Code (DTC).
Moreover, for employees who opt for NPS contribution through Salary Process, there is no need to submit
additional proof for claiming the tax deductions. The contributions made would get automatically updated in
your salary statement and will also be included in your Income Tax computation for the Financial Year.
Pon
From India, Lucknow
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Only upto 10% of your Basic + DA is allowed for tax exemption.
Post the Union Budget 2011-12 NPS has been given a special tax treatment wherein NPS contributions of the
Employer have been taken out of the purview of Sec 80CCE. Meaning whereby that the employer’s contribution
to NPS can be debited to CTC of the Employee (shall not exceed the limit of 10% of Basic Salary). In summary,
contribution by employee from CTC via mode “CTC Debit” (Employer’s contribution) is eligible for additional
deduction from Gross Taxable Income subject to a cap of 10% of Basic Salary.
Government has proposed that the investments in NPS be made EEE (Exempt at deposit, appreciation and
withdrawal) under the Direct Tax Code (DTC).
Moreover, for employees who opt for NPS contribution through Salary Process, there is no need to submit
additional proof for claiming the tax deductions. The contributions made would get automatically updated in
your salary statement and will also be included in your Income Tax computation for the Financial Year.
Pon
From India, Lucknow
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Tax & investment planning .pps
Insurance Linked Voluntary Payment of Income Tax Act 2009.doc