In the fiscal yr 2023-24, employed people can select between the outdated tax system and the brand new one. The outdated tax regime gives deductions and exemptions, whereas the brand new one has decrease tax charges however fewer deductions. It’s necessary to check your tax liabilities below each techniques earlier than deciding. If the outdated system is best for you, it is important to choose the best tax-saving choices.
As per an ET report, beneath are 4 tax-saving funding choices that not solely aid you cut back earnings tax but additionally present returns which are completely tax-free. Remember, these advantages are unique to people who select the outdated tax regime.
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Public Provident Fund (PPF)
Under Section 80C, investing within the Public Provident Fund (PPF) permits people to decrease their taxable earnings. This scheme falls below the “exempt-exempt-exempt” (EEE) class, that means buyers can declare deductions on their invested quantity, and they do not must pay tax on the curiosity earned or the maturity quantity. The PPF scheme is extremely safe because it carries a sovereign assure.
The rate of interest of PPF is revised by the central authorities each quarter. For the April-June 2024 quarter, the PPF gives an rate of interest of seven.1% every year.
The PPF account has a lock-in interval of 15 years, ranging from the tip of the monetary yr through which the funding is made. From the third to the sixth monetary years after opening the account, people can avail themselves of a mortgage facility. Premature withdrawal is allowed from the seventh monetary yr onwards, topic to particular situations. Additionally, below sure circumstances, people can go for untimely closure of their PPF account.
A PPF account could be opened both with a put up workplace or a financial institution. An particular person can open just one PPF account of their title, with the minimal and most funding being Rs 500 and Rs 1.5 lakh, respectively, in a monetary yr.
Sukanya Samriddhi Yojana (SSY)
The Sukanya Samriddhi Yojana (SSY) is a part of the federal government’s “Beti Bachao, Beti Padhao” initiative, designed as a financial savings scheme for woman youngsters. It permits mother and father to spend money on their daughter’s schooling or marriage whereas having fun with earnings tax advantages. Similar to the PPF, the SSY account follows the EEE tax standing, that means the invested quantity, curiosity earned, and maturity quantity are all tax-exempt.
With a sovereign assure, the SSY gives high-notch security requirements. The authorities opinions the scheme’s rate of interest quarterly. Currently, for the quarter ending June 30, 2024, the SSY gives a beautiful rate of interest of 8.2%.
The scheme has a lock-in interval of 21 years from the account’s opening date, with provisions for untimely withdrawal below sure situations.
A Sukanya Samriddhi Yojana account could be opened by a guardian within the title of a woman youngster, offered she is below 10 years outdated. The account could be established at both a financial institution or a put up workplace, with contributions starting from a minimal of Rs 250 to a most of Rs 1.5 lakh per monetary yr. The guardian oversees the account till the woman reaches 18 years of age.
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Employees Provident Fund (EPF) and Voluntary Provident Fund (VPF)
Salaried people enrolled within the Employees’ Provident Fund (EPF) system are required to put aside 12% of their wage for his or her EPF account, with their employer contributing the identical quantity. Contributions made by the worker to the EPF are eligible for tax deduction below Section 80C of the Income Tax Act. If a person needs to make extra contributions past the obligatory 12%, they’ll go for the Voluntary Provident Fund (VPF), with rules governing each EPF and VPF contributions being an identical.
Managed by the federal government, the EPF scheme gives the best security requirements. The rate of interest for the EPF in 2023-24 is ready at 8.25%.
The scheme has a lock-in interval till retirement age, with provisions for untimely withdrawals below sure circumstances, comparable to increased schooling bills, marriage, or medical therapy.
The EPF scheme enjoys an EEE (Exempt-Exempt-Exempt) tax standing, offered sure situations are met. However, ranging from the fiscal yr 2021-22, if an worker’s contributions to EPF and VPF accounts exceed Rs 2.5 lakh in a fiscal yr, the curiosity earned on the surplus quantity turns into taxable. Additionally, from the fiscal yr 2020-21, if the employer’s mixed contributions to EPF, National Pension System (NPS), and superannuation funds exceed Rs 7.5 lakh yearly, the excess quantity is taxable within the arms of the person recipient. Interest, dividends, and different earnings on these extra contributions are additionally topic to taxation. Nonetheless, the maturity quantity of the EPF scheme stays tax-exempt.
Therefore, so long as the contribution limits set by each the worker and the employer are usually not exceeded, the EPF retains its EEE tax standing.
