Four ways to escape from income tax!

by Shakti Singh Dulawat on May 21, 2012

Income tax is a big source of raising revenue for the government of the country, however; it brings a feeling of headache and seems like a burden when you have to pay it. Everyone seeks to escape from paying income tax as it brings a feeling of wasting money because a big part of your income become unreachable by paying it in income tax. Here are a couple of smart ways that can assist you in the reduction of income tax within 2012.

1) PPF or Public Provident fund
The public Provident fund is a smart source that can help you in escaping from income tax by contributing to the limit of 1 Lakh rupees according to Section 80C. The investment in the Public Provident fund for the year 2012 is raised from 70,000 to 1 Lakh rupees. This sort of investment is guaranteed for a steady income and a rate of return of 8.6% on the total invested amount. Keep in mind that you must have to make an investment in your PPF account of about this 500 per annum as a result of which your account will be locked for 15 years. This is one amongst the best, fixed income source that you must consider it.

2) EPF or Employee Provident Fund
EPF is a sort of forced savings that is cut down automatically from employees having a fixed monthly salary. Although, most of employee have bad reviews about Employee Provident Fund but actually it is an effective way to save income tax under section 80C. Apart from income tax relief it is also able to give you a return of about 8.5% annually. It is a good option for those who don’t have a habit of investments. Make sure to not withdraw this fund without having serious need.

3) ELSS or Mutual tax saving funds
ELSS or mutual tax saving funds is the option that you can use when you have completed your Section 80C limit and you don’t have any other option in hands to put your money in. For investment in this instrument you need t5o have a forecasting power as it leads you to stock markets and locks your invested amount for three years. It is a good option for saving income tax however you need to follow ELSS investment planning route.

4) Bank fixed deposits for five years
In five years fixed deposit plan for your money can also save you from tax under the deductions of Section 80C. Currently, the interest rate that you will enjoy is 9% per year. It is also vital to keep in mind that at maturity after the period of 5 years you will have to pay a tax. If you consider that the tax payable on maturity value then it will reduce your return from 9%.

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All those methods that allow you to escape from income tax on the other hand give you some excellent raise in income. You can opt for any of the above and even can opt many of them.

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