The Economic Times Wealth, May 9-15, 2016

Learn & Keep

PPF

Returns: 8.6%
Positives: Higher
returns than NSCs, FDs.
Negatives: Only for
those above 60, interest
is taxable.

The stamp duty and registration charges incurred during the time of transferring a
house in your name are also allowed as deduction under Section 80C. These charges
can vary between 4% and 8% of purchase price (depending on the state). These expenses can be claimed only in the financial year in which the expenses were incurred. The
expenses over and above `1.5 lakh cant be carried forward to the next year.

Stamp duty and registration charges

The EMI of your home loan consists of two partsinterest for that month and part of
principal. The principal component is allowed as deduction under Section 80C. If you
have a running home loan, the `1.5 lakh limit is taken care of. This benefit is available
only to investors who take a home loan from a financial institution.

Retirement
mutual
funds

ELSS
funds

HIGH

HIGH

The tuition fee of children is

accepted as deduction under
Section 80C. However, the government has put some restrictions on this. The facility can be
availed of only for two children.
Also, the `1.5 lakh limit is for
both the children's tuition fees.
Third, the educational institutionschool, college, university
should be located in India.

TUITION FEES OF CHILDREN

Returns: 8.6%
Positives: High interest rate,
tax-free returns.
Negatives: Only for girl child
up to 10 years, long lock-in
period till child is 18.

Returns: 5-6% in past one

year, 9-12% in past five years.
Positives: Lock-in period of
five years, no compulsion to
buy annuity.
Negatives: Exit loads for
withdrawal before 58, gains
subject to tax.

Returns: -8% - +9% in past one

year, 7-19% in past five years.
Positives: Potential for high
returns, shortest lock-in period of
three years, tax-free returns.
Negatives: Highly volatile and
carry market risk.

Returns: 2-5% in past one year,

9-10% in past five years.
Positives: Very low cost, flexibility to
change asset mix, fund managers.
Negatives: Locked in till 60, forced
to put 40% in annuity on maturity.

Sukanya
Samriddhi
Yojana

FLEXIBILITY

Returns: 8.8%
Positives: Tax-free
returns, no risk.
Negatives: Locked
in till you quit working.

NPS

Ulips

Returns: 7-11% in past one year.

Positives: Can rejig asset mix,
maturity amount tax-free.
Negatives: High costs, tied with
insurer for full term.

RETURN

There are expenses that are allowed as deduction under Section 80C.
However, the overall cap of `1.5 lakh applies to them too.

Returns: 5-6%
Positives: Tax-free income,
forced saving habit.
Negatives: Very low returns,
locks up money for long term.

Returns: 8.1%
Positives: Tax-free
returns, no risk.
Negatives: Long
maturity of 15 years.

EPF and
VPF

Senior
Citizen
Savings
Scheme

Unit-linked
Pension
Plans

Principal component in home loan repayment

BUYING A HOME

EXPENSES

LOW

Insurance
policies

Returns: 8.1%
Positives: Ultra safe
option, easily available,
lock-in period of five
years.
Negatives: Interest
fully taxable.

NSCs

Tax
Saving
FDs

Post Office
5-year Time
Deposit

Returns: 8-12% in past five years.

Positives: Can change asset mix or
make partial withdrawals.
Negatives: High-cost option, forced
to put 66% in annuity on maturity.

Returns: 7.9%
Positives: Ultra safe
option, easily available, lock-in period of
five years.
Negatives: Interest
fully taxable.

Returns: 7.5-8%
Positives: Very low
risk, easily available,
assured returns
Negatives: Income
fully taxable

LOW

The tax-saving investments under Section 80C have different attributes. Narendra Nathan
plots them on a matrix of risk, return, flexibility and liquidity. Find out which suits you best.

SEC 80C OPTION

CHOOSE THE BEST

16

HIGH

LIQUIDITY
LOW

HIGH

RISK
LOW