This is probably the easiest way to save tax if you have a Netbanking account.
After the demonetisation and the digital push, almost everyone has one. A few clicks of the mouse and your tax planning is done. However, as mentioned earlier, this convenience comes at a very high cost. Interest rates have come down significantly and are close to 7-7.5% right now. The bigger problem is that the interest is fully taxable. It is added to the income of the investor and taxed at the marginal rate applicable to him. In the highest 30% tax bracket, the post-tax yield is close to 5%.
Even so, tax-saving fixed deposits are suitable for risk averse investors, especially senior citizens who might already have hit the `15 lakh ceiling in the Senior Citizens' Saving Scheme and don't want to lock in money for the long term in a PPF account. Though NSCs offer higher rates than most banks, many senior citizens prefer to invest in deposits of their own banks, because they get better service than in a post office. Familiarity with bank staff is another important factor. These deposits are also useful when time is running out and the taxpayer is unable to decide where to invest, since they can be opened very quickly.
However, keep in mind that the interest from such deposits will be subject to TDS if the total income exceeds `10,000 in a financial year. Many investors have the misconception that if TDS has been paid, they have no further tax liability. This not correct. The TDS rate is only 10% and they have to pay additional tax if they fall in the 20% or 30% tax brackets.
It doesn't stop here. Tax payers will also have to report the income in their tax returns as income from other sources. Ignore reporting the income at your own peril. When TDS is cut, it gets reflected in the Form 26AS of the individual. The information in the Form 26AS is matched with the returns filed by the taxpayer. If tax has been cut, but that income is not declared by the tax payer, he will surely get a notice for the discrepancy.
Top 10 Tax Saver Mutual Funds for 2017 - 2018
Best 10 ELSS Mutual Funds to invest in India for 2017
1. DSP BlackRock Tax Saver Fund
2. Invesco India Tax Plan
3. Tata India Tax Savings Fund
4. ICICI Prudential Long Term Equity Fund
5. Birla Sun Life Tax Relief 96
6. Franklin India TaxShield
7. Reliance Tax Saver (ELSS) Fund
8. BNP Paribas Long Term Equity Fund
9. Axis Tax Saver Fund
10. Birla Sun Life Tax Plan
Invest in Best Performing 2017 Tax Saver Mutual Funds Online
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