the interest earned is taxable.
National Pension Scheme: An ideal investment vehicle for retirement planning, it offers tax-saving under Section 80C. But the deductions are allowed only for contributions to a Tier-I NPS account with a minimum annual investment of Rs 6,000. Also, no premature withdrawals are allowed.
National Savings Certificates and Bank FDs: NSC and bank FDs are widely used financial instruments. Deposits, however, are not tax-free, as is widely believed. Government regulations offer deduction of up to Rs 10,000 on interest earned in the savings bank account.
Life Insurance Policies: The premium paid for a policy covering an individual and his/her immediate family members is deductible up to Rs 1 lakh.
Rajiv Gandhi Equity Savings Scheme: RGESS offers tax savings for a year for first-time investors. They can claim a deduction of 50% of the invested amount. The maximum investment amount is fixed at Rs 50,000 with a maximum deduction of Rs 25,000. This deduction is over and above the Rs 1 lakh limit available under Section 80C.
Pension Plans: Pension plans initiated by life insurance companies also provide tax deductions under Section 80C since 2013. The downside is high fund-management charges.
The writer is CEO, BankBazaar.com