PPF tax benefits 2018: Don't invest in Public Provident Fund for income tax rebate in this situation
Public Provident Fund (PPF) and Equity Linked Savings Scheme are some of the financial instruments that immediately come to mind when we talk of tax saving.
Public Provident Fund (PPF) and Equity Linked Savings Scheme are some of the financial instruments that immediately come to mind when we talk of tax saving. All these tax-saving options are available to us under Section 80 of the Income Tax Act.
Almost all taxpayers are aware that under Section 80C, one can save tax on only up to Rs 1.5 lakh. No doubt, PPF is an instrument of tax saving for those people who don't want to take any risk. However, for the purpose of tax saving, PPF is not at all an apt means for some of the taxpayers. Let's find out the reasons:
Have you ever taken note of the part of your basic salary deducted every month in lieu of Employee Provident Fund (EPF). The income tax deduction benefit on EPF deposits is also covered under Section 80C. Similarly, Life Insurance premium, children's tuition fees, part of the principal amount in home loan EMI, ELSS, tax saving fixed deposit and PPF etc. are all covered under the same section of the IT act.
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That means you won't gain much by investing in PPF if you have already crossed the Rs 1.5 lakh threshold by investing in other options mentioned here.
Chandigarh-based SEBI-certified investment advisor and Certified Financial Planner Manikaran Singhal told Zeebiz.com that such people shouldn't invest in PPF whose EPF contribution is bigger because of their high basic salary and they have already invested in other options.
Singhal said such people should first see how much they have invested under Section 80C. If they have crossed Rs 1.5 lakh limit, they shouldn't invest in PPF.
So, what to do?
Instead of PPF, such people still have an option. Singhal said that irrespective of whether a person has invested Rs 1.5 lakh under Section 80 C options, they can still enjoy an additional IT deduction of Rs 50,000 by investing the money in an NPS Tier 1 account.
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A person can make an investment of maximum Rs 50,000 in an assessment year for getting the tax benefit. While filing the IT return, the person would have to claim benefit under Section 80CCD (1B). This way any taxpayer can save up to Rs 2 lakh deductions.
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