According to a common taxpayer’s perspective, choosing an instrument, for saving tax, is a big job. Most commonly, all the investors choose one of traditional instruments(PPF or NSC). But in today’s world, we have other options too. First, lets look the Section 80C.
The avenues available under 80C are
1. Premium paid for Life Insurance.
2. Contribution to Provident Fund.
3. Payment of Tuition Fees.
4. Investment in PPF.
5. Investment in NSC.
6. Investment in ELSS (Equity Linked Saving Schemes.
7. Repayment of Principal (With the Ceiling of Rs1.5 Lac) .
So you invested Rs 1 Lac in any of the above instrument. What is the return rate..?
| Particular | PPF | NSC | ELSS |
| Lock in Period (in Years) | 15 | 6 | 3 |
| Minimum Investment | 500 | 100 | 500 |
| Maximum Investment | 70000 | 100000 | 100000 |
| Return | 8% | 6% | 12% to 20% |
| Tax on Returns | Nil (As an date, there is no EET structure is followed) | Taxable | Dividend and Long Term Capital Gains are Tax Free |
On seeing the above table, the last column of the table is pulling one to invest in ELSS for tax savings. But that ELSS instrument is fully based on the equity market, the return is not an assured one. As I mentioned earlier, may be in my earlier post, investing in ELSS is based on one’s risk appetite.
In common one can take risk in his early ages. On taking this in mind, most of the financial advisers are advising us to allocate our asset (for Section 80C). That is
| Age | Life Insurance Premium | EPF / GPF | PPF / NSC | ELSS | Total |
| < 30 | 10000 | 25000 | 20000 | 50000 | 100000 |
| 30-45 | 10000 | 30000 | 25000 | 35000 | 100000 |
| 45-55 | 10000 | 350000 | 30000 | 25000 | 100000 |
| > 55 | 10000 | - | 65000 | 25000 | 100000 |
Why they are recommending this kind of asset allocation ,..?
Let us discuss some times later.
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