New Tax saving options in FY 2012-13

FY 2012-13 has come up with 3 new tax saving options and these tax saving options are beyond common savings meant under section 80C , 80CCC and 80D and thus have the potential to help you save more on tax payments. Usage of these tax saving options varies from profile to profile and is not meant for everyone. One option is meant for new investors, other is specifically for the benefit of corporate employees and the third can be used by anyone but is within the available limit. Let’s have a look at the new tax saving options in detail.

Rajiv Gandhi equity saving scheme or RGESS (Section 80CCG):

This tax saving option is meant for the new investors in stock market. Government wants every tax payer to have some exposure into stock market. As the new investor will be somewhat apprehensive on taking that leap so they have offered a tax saving option to make it more attractive to enter in the same. Though one may also take the exposure through ELSS or ULIP route but as I said this is for the first timers. The one who has just entered in this tax paying arena can now save more on tax payments by using this option.

The key feature of RGESS tax saving option is that it provides 50% tax rebate to new retail investors, whose annual income is below Rs 10 lakh. This is a once in lifetime investment and the maximum amount one can invest in it is Rs 50,000/-.

This scheme was announced in the budget speech 2012 but the product has been notified very recently. Following Securities will be considered eligible for this:

• Equity Shares of BSE 100 , CNX 100 , Maharatna, Mini ratna , Navratna PSUs including their Follow on public offers
• Specified close ended mutual funds and ETFs (exchange Traded funds) having exposure to the shares mentioned above.
• Initial Public Offer of a public sector undertaking wherein the government shareholding is at least fifty-one per cent, which is scheduled for getting listed in the relevant previous year and whose annual turnover is not less than four thousand crore rupees during each of the preceding three years.

New Pension scheme or NPS (Section 80CCD):

Hope you are aware of the fact that NPS is no longer only meant for central government employees.  W.e.f 1^st may 2009, this investment option is open to all and one can contribute in it on voluntary basis.  Where it is a very cost effective investment option there it is also a tax saving option tool too. Saving 10% of salary or gross total income in NPS a/c is covered u/s 80C and a part of overall investment of Rs 1 lakh. But what is new in this is section 80CCD (2). As per Section 80CCD (2) of income tax act W.E.F 1st Apr, 2012 up to 10% of the salary (basic and dearness allowance) of employers Contribution in NPS can be deducted as ‘Business Expense’ from their Profit & Loss Account. Thus if employees can negotiate with the employer and rather than asking for income in hand ask for the direct contribution by the employer to their NPS a/c then they can save a considerable sum in tax payment . Thus this Tax saving option indirectly helps in saving towards retirement too.  This tax saving option is specifically meant for corporate employees.Also Read: Make your investment tax efficient case study

(Read : All about NPS)

Preventive health Check-up (Section 80D):

This tax saving option is a part of section 80D which covers the premium payment on account of health insurance (Rs 15000/- for self and family, Rs 15000/- for parents or Rs 20,000/- if parents are senior citizen).(Also Read : Health Insurance for parents) This addition says that up to Rs 5000/- spent on preventive health check-up for self, family or parents will be deducted from the income and counted as a part of overall limit u/s 80D. In today’s kind of unhealthy lifestyle it is advisable to go for a preventive health check up every year so the health Issues can be diagnosed on time and preventive steps can be taken. Many of you actually go for this every year. Now paying for such tests will also help you in saving tax. This will benefit those whose Health Insurance premium is less than the threshold limits u/s 80D but the non-availability of tax benefit should not be a deterrent in going for this health check-up.

As I wrote earlier that these tax saving options are not meant for everyone. But if a youngster who has just joined new job and has not yet started investing, can enjoy the benefit of all these tax saving options and can considerably reduce his overall tax outgo.

I always say that tax planning should go hand in hand with financial planning. Thus if your financial planning says that you should take advantage of these tax saving options than you should go for it. Otherwise take the benefit of other tax planning tips to reduce your tax outgo. (Read : Tax planning at different life stages)