Share Market

Tax savings has been the biggest motivator for most investments worldwide, so many a times governments have initiated a lot reform through this tax savings. Deduction under Section 80Chas been introduced from the Financial Year 2005-06 and a deduction of up to Rs. 1,00,000 is allowed from Taxable Income in respect of investments made in some specified schemes which are provided below:

1. Life Insurance Premiums

2. Contributions t o Employees Provident Fund/GPF

3. Public Provident Fund (maximum Rs 70,000 in a year)

4. NSC (National Savings Certificates)

5. Unit Linked Insurance Plan (ULIP)

6. Repayment of Housing Loan (Principal)

7. Equity Linked Savings Scheme (ELSS) of Mutual Funds

8. Tuition Fees including admission fees or college fees paid for full-time education of any two children of the assessed (Any development fees or donation or payment of a similar nature shall not be eligible for deduction).

9. Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI, REC, PFC etc.

10. Interest accrued in respect of NSC VIII issue.

11. Pension scheme of LIC of India or any other insurance company.

12. Fixed Deposit with Banks having a lock-in period of 5 Years

Under Section 80D deduction of up to Rs 40,000 can be claimed in respect of premium paid by cheque towards health insurance policy of various General Insurance companies. Under section 24(b) interest on borrowed capital for the purpose of house purchase or construction is deductible from taxable income up to Rs. 1, 50,000.

The following incomes are completely exempted from income tax without any upper limit.

1. Interest on PPF/GPF/EPF.

2. Interest on GOI tax free bonds.

3. Dividends on Shares and on Mutual Funds.

4. Any capital receipt from life insurance policies i.e., sums received either on death of the insured or on maturity of life insurance plans.

5. Interest on savings bank account in a post office.

6. Long term capital gain on sale of shares and equity mutual funds if the security transaction tax is paid/imposed on such transactions.

7. Dividend income from companies /equity-oriented Mutual Funds is completely exempt in the hands of investors. Dividend is also tax-free in the hands of investors in case of debt-oriented Mutual Fund schemes.