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Tips for the Income Tax planning

# Little Savings

The Indian government will always give a chance upfront on investments plan to every individual before starting of the financial year. But every time, we will not consider it as important. However, I will not preach the importance now. But from my experience, I want to share some tips on the investment planning for tax exemptions.

If we take the Income Tax structure, the big part of the investments goes to the section 80C. There are numerous ways to invest and exempt from Tax under 80C.

The upper limit under the section 80C is 1.5 L per annum, which is equivalent to the INR 12,500 per month. 
So, here I take a cut and will invest under 80C. Before the start of FY, try to fix your investment amount. My suggestion is to invest at least half of the upper limit, say 6000(excluding EPF). 

Below are the different investment options under 80C.
Employee's share of PF & VPF contribution
Life Insurance Premium self or dependants
Public Provident Fund (PPF)
Deposit under Sukanya Samriddhi Yojana
Bank / Post Office Deposit - 5 years & above
Equity Linked Savings Scheme (ELSS Mutual Funds - self only)

Lee see in detail for each investment option.

* Investment in PF is the mandatory investment for every salaried individual. 

* In my opinion, Life insurance is not an investment and if you already have a Life Insurance, it is good to continue.

* The next immediate option to look into is Public Provident Fund(PPF). It is simple to open in any nationalized banks and Post Offices. My suggestion is open with bank. And the amount to be invested in PPF should be minimal, as we are already investing in the PF, which will help to cover your needs. And investing in PPF should be done before 5th of every month for maximum returns. And PPF account should also open in the first week of the April month.

* If you are married and have a baby, the first thing is to open an Sukanya Samrudhi Yojana(SSY) account. In fact, this is the only investment option where the interest rate is higher compared to the remaining options. And investment in SSY should be done before 10th of every month.

* The last two options, I will keep as a life savers at the last minute. As opening a Fixed Deposit account(5 years) and investment in ELSS are easy. So, If I miss above options to invest, at least by the end of the FY, I will invest either in FD/ELSS.

Now, how much one should invest in the above options.

The ideal case is 
EPF - 1800
PPF - 2000
SSY - 5000

The next section is 80D, the company already provides the Health Insurance for every employee. If your parents are coming near to 60 years of age, then one should consider the extra insurance.

As every tax payer, I don't prefer all my savings goes to the above options, but I suggest, at least one-fourth of your savings should invest here. And before every start of Financial Year, analyse the in's and out's of your salary per month.

Salary - Loans - Expenses - Rent = Remaining Amount.

This will give how much liquid amount available for the savings, which will help plan your investments.


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