It is not right to wait till the end of the financial year for tax planning. Financial planners advise that you should start planning for it as soon as the new financial year begins.
Your options include Public Provident Fund (PPF), National Pension System (NPS), Sukanya Samriddhi Yojana (SSY), Monthly SIP in Equity Linked Scheme (ELSS), Employees Provident Fund (EPF), Tax Saving Fixed Deposits (FDs) and payment through life insurance premium.
Investors with low risk appetite and investors in lower tax brackets can try tax saving FDs. However, you need to remember that your money will be locked for five years. You can compare term deposit rates of different banks to find the best option. This is calculated on the basis of quarterly compounded interest rate. BankBazaar.com has collected data related to this. This data is of 26 June 2014.
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Axis Bank, HDFC Bank and ICICI Bank are offering 7 percent interest on tax-saving FDs. If you have invested Rs 1.5 lakh in a tax-saving FD for 5 years at this rate, it will grow to Rs 2.12 lakh in the respective period. Similarly, Canara Bank is offering 6.70 percent interest on tax saving FDs. If you can invest Rs 1.5 lakh for 5 years at this rate, the tax-saving FD will grow to Rs 2.09 lakh.
Bank of Baroda, Punjab National Bank, State Bank of India and Union Bank of India are offering 6.5 percent interest rate on tax saving FD. At this rate, if Rs 1.5 lakh is invested in tax saving FD for five years, it will grow to Rs 2.07 lakh. Indian Bank’s rate on tax saving FD is 6.25 percent. According to this, if Rs 1.5 lakh is invested in 5 years, this FD will grow to Rs 2.05 lakh.
The tax FD rate of Bank of India is 6%, that is, if you deposit Rs 1.5 lakh in it, you will get Rs 2.02 lakh in 5 years. Reserve Bank (RBI) subsidiary Deposit Insurance and Credit Guarantee Corporation (DICGC) also gives fixed returns on FD of Rs 5 lakh.
