Tax saving long term investment

Hi, What are the best options for long term tax savings. I have one 25L term insurance plan.(premium 7.5k/yr). one money back insurance 5L(premium 35k/yr) and fidelity tax advantage fund 30k/yr. I dont have an EPF.

I want to know wether i should coninue with fidelity or not with DTC coming in next year?? Also i want to take PPF or NPS. Which would be better?? Any other options?? Please guide.

Thanks.

asked Sep 13 '11 at 11:27 by Yatin 16225


Assuming you are asking for ELSS plan of fidelity, you can continue as the deduction under section 80 C is available for the current financial year. PPF comes under section 80C whereas NPS is over and above 80C, hence you should invest in both.

For safe and tax efficient tax planning one should invest:

  1. Provident fund (EPF or PPF) to the maximum. NPS and PPF both offer long term saving with tax benefit. Infrastructure bond also offer long term saving and it is over and above 80C.

  2. Purchase home through home loan and get tax benefit with long term saving.

  3. If the 80C investment is full and you want to invest for long term than diversified mutual fund offers tax efficient long term saving.

The risk cover should be approx 8 to 10 times of your annual income. After implementation of DTC the money back policy will not be eligible for deduction under section 80C because risk cover should be minimum 20 times of annual premium.

answered Sep 13 '11 at 16:10 by TaxSpanner 911

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First, you should increase your sum assured in term insurance. Ideally it should be 10 times your yearly income plus any outstanding liabilities (like home/personal/car loan). You can buy ICICI iProtect online term insurance or LIC term plan online plan (coming soon)

Also, get a family floater medical insurance to cover you and your family against medical expenses. Even if your employer has covered you under mediclaim policy, do buy a separate policy yourself too.

After direct tax code is applicable, income tax benefit won't be available for tax saving mutual fund and non-pure life insurances (where premium paid in any year is less than 5% of sum insured). So your fidelity tax advantage investments and money back insurance won't beneficial after April, 2012.

You should definitely open an account in PPF and New pension scheme (NPS). PPF has fixed rate of interest and provide safe returns. Whereas in NPS, you can also contribute in equity linked investments, which may provide better returns in long run (over 10 years).

answered Sep 13 '11 at 16:02 by pankaj 5.2k320

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Thanks Taxspanner and Pankaj for answering my query.
(Sep 13 '11 at 19:08) Yatin

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Asked: Sep 13 '11 at 11:27

Seen: 2,557 times

Last updated: Sep 13 '11 at 20:12