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Beyond ELSS Mutual funds, insurance and PPF to save tax

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In addition to ELSS from mutual funds, insurance and PPF, there are some other lesser known instruments to save taxes as well.


One of the popular ones is the Rs 1.5 lakh annual tax deductions available to individuals who have taken a loan from a bank or a housing finance company to buy home. This is the maximum amount one can claim on the actual amount of interest paid on a house one is living in. The home buyer can also claim principal payment on the mortgage, but this would be within the Rs 1 lakh per annum cap under Section 80C of the I-T act. The Budget also allows for an additional Rs 1 lakh claim on tax deductions on interest paid on new homes but the price of the house should not exceed Rs 25 lakh.


Another tax-saving instrument is the Rajiv Gandhi Equity Savings Scheme (RGESS), aimed at encouraging flow of retail savings into the stock market. RGESS allows an income tax deduction of 50% only for new retail investors, with a per annum investment cap at Rs 50,000.From next fiscal, the tax deductions allowed on RGESS will be for three years and for people with an annual income of Rs 12 lakh per annum. There is also a three-year lock in all RGESS investments. Several mutual funds have launched RGESS-compliant plans, and going by the increased activity more seems to be in the pipeline.


Another little-known provision in the Income Tax Act allows salaried people to avail of higher tax benefits through the National Pension Scheme (NPS), but there is a catch.
Under section 80CCD(2) of the act, which was introduced earlier this fiscal, up to 10% of an employee's basic salary could be invested in the NPS, under its category II plan, and this amount is tax deductible. But this deduction has to be through the employer, and the employee can not directly avail of this scheme.


What this means is that the employer of a person who is earning Rs 10 lakh a year as basic salary, can put Rs 1 lakh in NPS directly on behalf of the employee and the employee in turn would be allowed a tax deduction of about Rs 30,000, assuming the person is in the 30% income tax bracket. Several employers are embracing this by changing the salary structure of their employees so that they can avail of higher tax benefits.


However, a Mumbai-based financial planners pointed out that since NPS follows a taxation system called EET (exempt, exempt, tax), that is the NPS subscriber is taxed while withdrawing the corpus, the scheme under section 80CCD(2) is basically not tax deduction but tax deferral. Here, although the person is getting a tax deduction at time of investing, he/she will be taxed when he/she goes to withdraw the same.

However, the silver lining is that under the proposed Direct Tax Code (DTC), all NPS corpus will become EEE.


Beyond the popular ones

•Home buyers can claim each year up to Rs 1.5 lakh deduction on interest paid on home loans. The Budget enhanced this limit by another Rs 1 lakh for new homes costing up to Rs 25 lakh

•Rajiv Gandhi Equity Savings Scheme (RGESS)

•NPS through category II plan (through the employer)

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

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Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

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Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online
      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online
      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online
      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online
      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver MutualFundsInvest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online
      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

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