Wednesday, 6 July 2016

7th Pay Commission payout soon; best tax-saving investment options for you

The 7th Pay Commission payout is all set to begin with central government employees to get higher salaries and arrear payments soon with the Union Cabinet giving a go-ahead to the panel’s recommendations. If you are a central government employee, the increased pay packet will come
with its own set of concerns on managing the money. While there will be a portion for expenditure that has been pending, you need to have a definite plan of setting aside a decent amount as long-term savings and invest it in appropriate instruments. One portion of investment would be for tax-saving purposes. You will have nearly eight months till March 31, 2017 to make your investment for tax-saving purposes but it is always good to start investing early. So, what are the options before you and what should you look for while investing for saving tax? “There are a large variety of tax-saving options available under Section 80C of the Income-Tax Act. However, the key issues are the safety, returns and tax status while investing. You also have to consider the periodic returns and at the time of maturity or redemption,” Sanjeev Govila, CEO, Hum Fauji Initiative, told FeMoney. Govila suggests Public Provident Fund (PPF) figures among the top of the list. “PPF is the best tax- saving avenue for the risk averse as it gives decent interest of 8.1 per cent as on date and enjoys the E-E-E (Exempt ExemptExempt) status. If someone finds the returns low and are prepared to accept some volatility of returns, tax saving mutual funds (called ELSS – Equity Linked Savings Scheme) are very good. They also have E-E-E status. If chosen carefully ELSS are likely to provide higher returns than PPF,” Govila said. Though ELSS have the shortest lock-in period of all tax-saving investments of just three years, you can continue investing for as long as you want. Also contributions can be made regularly through automatic ECS from bank account. Govila, however, warns that ELSS returns are market linked.

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