Within the fiscal 12 months 2023-24, employed people can select between the outdated tax system and the brand new one. The outdated tax regime provides deductions and exemptions, whereas the brand new one has decrease tax charges however fewer deductions. It is necessary to match your tax liabilities underneath each techniques earlier than deciding. If the outdated system is best for you, it is vital to select the appropriate tax-saving choices.
As per an ET report, under are 4 tax-saving funding choices that not solely assist you scale back revenue tax but in addition present returns which might be utterly tax-free. Bear in mind, these advantages are unique to people who select the outdated tax regime.
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Public Provident Fund (PPF)
Below Part 80C, investing within the Public Provident Fund (PPF) permits people to decrease their taxable revenue. This scheme falls underneath the “exempt-exempt-exempt” (EEE) class, that means buyers can declare deductions on their invested quantity, they usually 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 provides an rate of interest of seven.1% each year.
The PPF account has a lock-in interval of 15 years, ranging from the tip of the monetary 12 months 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. Untimely withdrawal is allowed from the seventh monetary 12 months onwards, topic to particular situations. Moreover, underneath sure circumstances, people can go for untimely closure of their PPF account.
A PPF account will be opened both with a submit workplace or a financial institution. A 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 12 months.
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 allows dad and mom to spend money on their daughter’s schooling or marriage whereas having fun with revenue tax advantages. Just like 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 provides top-notch security requirements. The federal government critiques the scheme’s rate of interest quarterly. At the moment, for the quarter ending June 30, 2024, the SSY provides a pretty 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 underneath sure situations.
A Sukanya Samriddhi Yojana account will be opened by a guardian within the title of a lady baby, offered she is underneath 10 years outdated. The account will be established at both a financial institution or a submit workplace, with contributions starting from a minimal of Rs 250 to a most of Rs 1.5 lakh per monetary 12 months. The guardian oversees the account till the woman reaches 18 years of age.
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Workers Provident Fund (EPF) and Voluntary Provident Fund (VPF)
Salaried people enrolled within the Workers’ 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 underneath Part 80C of the Earnings Tax Act. If a person needs to make extra contributions past the obligatory 12%, they will 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 provides the very 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 underneath sure circumstances, reminiscent of larger schooling bills, marriage, or medical therapy.
The EPF scheme enjoys an EEE (Exempt-Exempt-Exempt) tax standing, offered sure situations are met. Nevertheless, ranging from the fiscal 12 months 2021-22, if an worker’s contributions to EPF and VPF accounts exceed Rs 2.5 lakh in a fiscal 12 months, the curiosity earned on the surplus quantity turns into taxable. Moreover, from the fiscal 12 months 2020-21, if the employer’s mixed contributions to EPF, Nationwide Pension System (NPS), and superannuation funds exceed Rs 7.5 lakh yearly, the excess quantity is taxable within the fingers of the person recipient. Curiosity, dividends, and different earnings on these extra contributions are additionally topic to taxation. Nonetheless, the maturity quantity of the EPF scheme stays tax-exempt.
Due to this fact, so long as the contribution limits set by each the worker and the employer aren’t exceeded, the EPF retains its EEE tax standing.
