Seeking Advice on Secure Investment Options for Tax Saving in India

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

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.

Regards,
Sid

Awaiting Notification on Infrastructure Bonds

The budget is silent on the 20K (80CCF) infrastructure bonds. Let us wait and see for the notification.

I hope the government will not change the provisions made in the 2011-12 budget.

Regards,
Pon

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.

Regards

Is the NPS for private employees or only government employees?

You can avail the benefit of only (100,000 - Your PF Contribution) under Sec 80C.

Investment Options 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.

Medical Insurance Premium Under Sec 80D

Under Sec 80D, Medical Insurance Premium, you can claim a total of 35,000 (15,000 - Self Dependents, 20,000 - for parents if parents are senior citizens, else 15,000 for parents if they are not senior citizens; now, age above 60 is a senior citizen).

Sec 80CCF infra bonds.

House Rent Allowance (HRA)

What about HRA (House Rent Exemption)? What are you doing?

Financial Planning Advice

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 3,000 Rs, if I need to invest 30,000, 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.

Regards.

Thank you, everyone. This has been very useful. What I have finally done is divided the necessary investment into five 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. However, 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

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