Small savings schemes play a crucial role in the financial planning of individuals, offering attractive investment options with potential tax benefits.
Under Section 80C of the Income Tax Act, individuals can claim deductions of up to Rs. 1.5 lakh per year from their taxable income by investing in eligible schemes. This provision encourages taxpayers to allocate their funds to these schemes, fostering a culture of saving and investment.
Senior Citizens Savings Scheme
One such scheme that offers taxation benefits to senior citizens is the Senior Citizens Savings Scheme (SCSS). While the interest earned under SCSS is taxable, deposits made in this scheme qualify for a deduction of up to Rs. 1.5 lakh under Section 80C. The SCSS allows for a single deposit in multiples of Rs. 1,000, with a maximum limit of Rs. 15 lakh.
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Sukanya Samriddhi Account
The Sukanya Samriddhi Account is specifically designed for parents of girl children, launched as part of the Beti Bachao, Beti Padhao campaign. Investments made in this account can be deducted from taxable income up to Rs. 1.5 lakh per year under Section 80C. Further, investors can enjoy interest earned and the amount received upon maturity tax-free.
National Savings Certificates
Investing in National Savings Certificates (NSC) is an attractive option backed by the government of India. While there is no maximum limit for NSC deposits, investments of up to Rs. 1.5 lakh in a financial year qualify for a tax deduction under Section 80C. Unlike fixed deposits, NSC interest is not subject to TDS (Tax Deducted at Source).
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Public Provident Fund
The Public Provident Fund (PPF) falls under the EEE (Exempt, Exempt, Exempt) category. Deposits made in PPF are eligible for a tax rebate under Section 80C, with a maximum limit of Rs. 1.5 lakh per year. Furthermore, the interest earned on PPF investments is also tax-free.
Post Office Time Deposit Scheme
The 5-Year Post Office Time Deposit Scheme presents a viable investment option for individuals seeking secure returns. Similar to bank fixed deposits, investments in this scheme qualify for tax deductions of up to Rs. 1.5 lakh per financial year. The interest earned on these deposits is taxed if it exceeds Rs. 40,000 for general citizens and Rs. 50,000 for seniors. The plan offers flexibility, allowing a minimum investment of Rs. 1,000 with no upper limit. The 5-year post office deposit scheme fetches an interest rate of 7.5 per cent.
Kisan Vikas Patra (KVP)
Kisan Vikas Patra (KVP) does not qualify for deductions under Section 80C. The returns from KVP are entirely taxable. However, withdrawals made after the scheme's maturity are not subject to tax deducted at source (TDS), providing investors with an advantage during the withdrawal phase.
