The individuals whose incomes fall into the category of tax slabs in India are immensely facilitated by the different schemes for tax saving in India. The government of India and other private sector companies offer varied options to save taxes in the form of bonds, savings deposits, insurances, and so on.
Tax Saving Bonds for Tax Saving in India:
The Reserve Bank of India offers an option for tax saving in India to the tax payers through the issuance of a unique tax savings bond. The bond has been named as the 6.5 % Savings Bonds, 2003 and tenure of the bond has been decided to be 5 years. As the name suggests, the rate of interest of this bond is 6.5% and the bond offers the facility of half-yearly interest payment. These bonds have the appearance of Stock Certificates. The Reserve Bank of India offers Bank Ledger Account facility with these bonds and serves to distribute these bonds by means of the Public Debt offices. The Reserve Bank of India has not set any particular limit for the maximum amount of funds to be invested in these bonds.
These bonds are of 2 types - the 6.5% Savings Bonds (Cumulative bond) and 6.5% Savings Bonds (non-cumulative bond) and the bank pays off the interest amount through ECS or through Interest Warrant for 6.5 % Savings Bonds (non-cumulative) and the interest payment for 6.5% Savings Bonds (cumulative bond) is made in accompaniment with the principal amount at the time of redemption. The best part is that the bond-holders are exempted from the payment of tax on the income received from the interest payment under the Income Tax Act, 1961.
Tax Saving in India for Senior Citizens:
The central government has arranged for unique tax saving schemes for the senior citizens in India. Similar to the 6.5% Savings Bonds, these unique schemes are exempt from the payment of tax on the interest income of these schemes as per the Income Tax Act, 1961. The scheme holders are required to deposit at least Rs. 1,000 as the principal amount of the scheme and the maximum investment limit on these schemes may extend to cover the sum of the retirement benefit. The tenure of this scheme is 3 years and the rate of interest offered is 8% on a yearly basis.
Private Sector Bonds for Tax Saving in India:
The private sector banks like ICICI Bank offer several options for tax saving in India. Some of the options are the special tax saving bonds known as the Tax Saving Bond Option I, Tax Saving Bond Option II, and Tax Saving Bond Option III. The price of tax saving bonds I, II, III is the same i.e., Rs. 5,000 but the face values differ widely as the Tax Saving Bond Option II has a face value of Rs. 6,660, Tax Saving Bond Option III has a face value of Rs. 9,000, but the face value of Tax Saving Bond Option I is Rs. 5,000. The tenures of the 3 bonds also vary widely. 3 years is the tenure of Tax Saving Bond Option I, whereas the tenure of Tax Saving Bond Option II is 3 year 4 months and that of Tax Saving Bond Option III is 6 years 6 months. Bonds like the 6.5% Savings Bonds Cumulative bonds pay off the interest amount together with the capital amount at the time of maturity of the bonds. These bonds serve to save taxes of the bond holders by offering rebates under Section 88 of the Income Tax Act, 1961.
Tax Saving in India through Post office:
Post offices also offer a number of tax saving schemes such as:
- Deposit Scheme for Retiring Government Employees
- Post Office Time Deposits
- Post Office Monthly Income Scheme
- Deposit Scheme for Retiring Employees of Public Sector Companies
- Post Office Recurring Deposits
- National Savings Certificates
- Kisan Vikas Patra
Tax Saving in India with Savings Certificate:
One of the widely used options for tax saving in India includes National Savings Certificate. This certificate has the facility to be jointly held by two persons, apart from the facility of holding individually. The tenure of these certificates is 6 years and the certificate holder is required to make a minimum payment of Rs.100 as the capital amount of the certificate. The certificates serve as an important instrument in the acquirement of loans and are endowed with advantage of transferability. However, the best part regarding this certificate is that section 88 of the Income Tax Act, 1961 provides for benefits on the capital of the certificate and section 80 L of Income Tax Act, 1961 offers deductions on the interest income allotted by the certificate.
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