Tax Guide 2007

The 2007 Guide To Tax Planning

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Tax Guide

C O N T E N T S TOPIC

Page No.

1.

8 Introduction.................................................................................................

03

2.

8 What Section 80C offers..........................................................................

05

3.

8 Exempt Exempt Tax: a quick brief............................................................

07

4.

8 Tax-Saving Funds.........................................................................................

08

5.

8 Insurance- the smart way of tax planning.............................................

09

6.

8 Mediclaim......................................................................................................

11

7.

8 Small Saving Schemes.................................................................................

12

8.

8 Home Loans.................................................................................................

13

9.

8 Capital Gains Bonds...................................................................................

14

10. 8 Bank Fixed Deposits...................................................................................

16

11. 8 Infrastructure Bonds..................................................................................

17

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8 Introduction Few months for the new financial year to begin and its time to make a run for your tax planning investments, isn’t it? Though the time constraint is quite evident, if you follow a few basic rules, you can do a lot more in this short time left. Firstly, lets try to streamline our focus on tax planning, may be seriously this time, and understand what are A common reasoning among investors is- why pay taxes when the same amount can be invested in tax saving instruments and can get returns on it too! Very true but before taking the plunge in investing, an overview of the advantages and disadvantages of various instruments (if not a through knowledge) is important. Involve your financial advisor as much as possible, his understanding of the tax instruments will help you in achieving your tax goal as well as help you reap benefits. Beginning with mutual funds, over the years, it has

risk in dicey options too. But as one grows old,

gained a lot of popularity and to reap maximum

he/she has to shift from risky options to more safe

benefits, Systematic Investment Planning (SIP)

and secured alternatives. To help you in making

has become the new mantra and advised by

efficient choices, we have provided this ‘tax guide’

most investment experts. In the flow of making

that will help in evaluating your investments and

maximum benefits, one either overlooks the

enable you to make right decisions.

crucial investment options or ends up making

Before we begin anything, lets understand what

bad investment choices. For example, there are

does Section 80C offers, for all the tax benefits

people who want to accrue good KNOW ABOUT

available, fall under this section. Honestly speaking,

profits through investments but show

for some to decide the most suitable instrument to

1 What Section 80C offers 2 Tax liability 3 Tax Free Incomes 4 Gift Tax 5 Exempt Exempt Tax: a quick brief 6 What investors can do? and many more...............

an indifferent attitude to mediclaim

invest can be a tedious activity. Infact, people who

or life insurance. And even if they

take the initiative to analyse the options available

have invested in these tools it is by

is of rarity. So we decided to provide you with the

and large to avail tax benefits and

necessary information that will help you make up

nothing else.

your mind. And if with little time investment by way

Ideally speaking, when young one

of reading this tax-planning guide, you can attain

should try and save as much as

two most important goals i.e. tax benefit and long-

possible as you can run the highest

term goals at the same time, then why not take the

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The 2007 Tax Guide Planning ¨

I n t r o d u c t i o n

the pros and cons of each investment.

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Tax Guide

Contents Page

utmost advantage and get the maximum out of it. Coming back to the point, here it becomes important to mention that there are reports floating around hinting, that in the forthcoming budget, Feb ‘07, the Finance Minister, Mr. Chindarabam, may lower the tax rates. This is definitely going to be music to the ears of billions of taxpayers. ¨



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8 What Section 80C offers rebate will be available to an individual with the taxable income exceeding Rs. 1,00,000. This will adversely affect individuals whose taxable income marginally exceeds Rs. 1,00,000. Women get additional benefit in tax exemption upto a limit of Rs. 1,35,000. And senior citizens get benefits upto Rs. 1,85,000. Under Section 80C you are exposed to the following options:

Section 80C is the most important Section for saving tax purpose and all tax-payers (individuals only) who irrespective of income levels, age, gender or profession can avail tax benefit upto Rs. 1,00,000, under this section for their income by investing or spent in the variety of instruments specified by the government. Now, the main

1. Equity Linked Saving Schemes (ELSS)

concern of explaining the tax structure and the

2. Life Insurance Premium

Section 80C is to make it convenient for you to

3. Public Provident Fund (PPF)

understand how to spend this Rs. 1,00,000 in a manner that will help you to get the tax deduction

4. National Saving Certificate (NSC)

and at the same time help you achieve your

5. Home Loan Repayment

financial goals.

6. Provident Fund (PF)

Individuals with an annual income of Rs. 1,00,000 are exempt from tax; those falling in the income bracket of Rs. 1,00,000-Rs. 1,50,000 are subject to a tax of 10%. For those earning between Rs. 1,50,000 to Rs. 2,50,000, a 20% tax is charged and anything above Rs. 2,50,000 a tax of

7. Fixed Deposit (FD) 8. Infrastructure Bonds

Tax liability Filing of Income Tax Return

30% is paid. A relief is provided to the resident

1. Filing of income tax return is compulsory for all

individual belonging to lower income group. A



individuals

resident individual having taxable income up to



exceeds the maximum amount which is not

Rs. 1,00,000 is not subject to paying any income



chargeable to income tax i.e. Rs. 1,35,000 for

taxes. Such individual will be entitled to rebate



Resident Women and Rs. 1,85,000 for Senior

equal to the amount of tax payable on taxable



Citizens and Rs. 1,00,000 for other individuals

income up to Rs. 1,00,000. However, no such



and HUFs.

whose

gross

annual

income

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The 2007 Tax Guide Planning ¨

2. The last date of filing income tax return is July

6. Long term capital gain on sale of shares and



31, in case of individuals who are not covered



equity mutual funds if the security transaction



in point 3 below.



tax is paid/imposed on such transactions.

3. If the income includes business or professional

Gift Tax



income requiring tax audit (turnover Rs. 40

Gift tax was abolished with effect from October



lakhs the last date for filing the return is

1, 1998. The gifts are no longer taxable in the



October 31.

hands of donor or donee. However, with effect

4. The penalty for non-filing of income tax return

from September 1, 2004, any gift received by



an individual or HUF will be included in taxable

is Rs. 5000.

income, provided the amount of gift exceeds Rs.

INDIVIDUAL TAX RATES

25,000. However, gifts received from any of the following will continue to remain tax-free:

Taxable Income

Rates

Upto Rs. 1,00,000

NIL 10%

Upto Rs. 1,50,000

20%

Above Rs 2,50,000

30%

Tax Free Incomes The following incomes are completely exempt 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.



However, in case of life insurance policies



issued after March 31, 2004, exemption



maturity payment u/s 10(10D) is available



only if the premium paid in any year does not



exceed 20% of the sum assured.

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

2. Brother or sister 3. Brother or sister of the spouse

Upto Rs. 1,00,0001,50,000



1. Spouse

4. Brother or sister of either of the parents of the

individual

5. Any lineal ascendant or descendant of the

individual

6. Any lineal ascendant or descendant of the

spouse of the individual

7. Spouse of the person referred to in (2) or (6)

Also, gifts received on the occasion of



marriage or under a will by way of inheritance



are also tax free

what investor can do?

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8 Exempt Exempt Tax: a quick brief ¨

instruments is free from tax payments at all the

According to the Exempt Exempt Tax system,

three stages i.e. Exempt at the contributions stage,

Individuals claiming income tax benefits under

Exempt at the earning stage or accrual stage and

80C will now have to pay taxes at withdrawal

Exempt at withdrawal stage. However, there is a

stage. Withdrawals before the expiry of the term will

strong chance that EET will replace the existing EEE

also be taxed. However for the first time investors

system.

will have the option to switch between the savings instruments which are mentioned above and the

What investors can do?

good news is that no tax will be levied for this

The focus of the investors should be directed to

switching over between the saving instruments.

savings than focusing on mere tax implications.

Gratuity payments and superannuation funds

Choose the schemes as per your requirements,

will be exempt from this system. All the long

irrespective of it being a long or short-term

term saving instruments are subject to the EET

investment. The fear of taxes in way induces a

system. However, Short and medium-term savings

habit of ‘saving’. The new EET system may give the

certificates and infrastructure bonds are expected

investment plans a hazy shape but one has to abide

to be outside the EET umbrella. At present, the tax

by the law. So the best option available is to invest

system followed is Exempt-Exempt-Exempt (EEE),

in the schemes, which are made available that may

which means that investments in the specified

or may not be available in the coming years. ¨

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8 Tax-Saving Funds Tax saving funds are also popularly known as Equity Linked Saving Schemes (ELSS). To begin with the definition, ELSS can be best described as the Equity fund floated by mutual funds. It is basically a scheme, which invests in the equity shares of the companies. Such investment will have to be made in the mutual fund specified u/s 10(23D) of the Income Tax Act to be eligible for rebate. ELSS is available in two forms- Open-ended and Close ended. Open-ended funds require a compulsory lock-in period of 3 years to claim the deduction u/s 80 C of Income Tax Ac, 1961. The major difference between these two funds is that close-ended funds are available for subscription only once, which is in contradiction to openended schemes. An open-end fund is a type of mutual fund where there are no restrictions on the amount of shares the fund will issue. If the demand is high enough, the fund will continue to issue shares no matter how many investors are there. Open-end funds also buy back shares when investors wish to sell. A closed-end fund is totally different. Like a company, it issues a set number of shares in an initial public offering and they trade on an exchange. A fund like France Growth Fund trades on the New York Stock Exchange just like any other stock. Its share price is determined not by the total value of the assets it holds, but by investor demand for the fund. Considering the above pros and cons involved in both these funds, take your decision accordingly. These funds serve the best option to accumulate wealth faster but do remember investments in mutual funds are subject to market risks. ¨

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8 Insurance- the smart way of tax planning Nobody can deny the protection that insurance offers. It is one of those tools that we tend to miss out on assuming a good health and a long life. So when you question whether you need insurance,

Insurance

the answer that you may get is a resounding ‘yes’, you definitely need insurance and you just cannot afford to say, ‘No’. Life insurance can play an important role in the overall strategic-planning process. Lets analyse which policy suits you the best.

Which policy suits you the best? The type of policy that suits you best depends on many factors like income, monthly expenditure, number of dependent members, etc. The policy that you choose should completely depend on how much risk you would want to secure. If you are the sole breadwinner of the house and you have more number of dependants then you would need to choose the insurance coverage

that is sufficient enough to take care of your family expenses in your absence. In such a case, a ‘term policy would suit you. Term policy-it is the purest form of life insurance. The policy keeps you in the protection net for a specific term. Should the insured person pass away, your nominee would receive the insured amount assuming, you have insured yourself for Rs. 20 lakhs. So you decide the amount for which you want your family to receive if some unfortunate incident happens to you. Incase you survive the term; you do not receive any maturity amount. But one should not look at it from ‘expense’ point of view. An insurance policy

POLICY?

be it a term, whole, endowment or ULIP are good enough choices with its own unique features. It is recommended to opt for a term policy when you are in your teens. Whole life policies- cover the insured for life. On attaining the maturity age, the insured receives

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Tax Guide

the due amount along with the bonus. Whole

If you feel, you need more benefits, there are

life policies offer the highest bonus and cost

optional add-ons called as ‘riders’ that can be

less compared to endowment policy. If you want

attached to the base insurance policy. You can get

insurance protection that extends throughout your

riders with the additional premium payment. The

lifetime, whole life policy is the ideal one for you.

benefits are worth the extra premium paid. Double

However the premium paid is throughout till the

Accident Benefit Rider will offer your family double

maturity age (80-100 years).

the sum assured should anything happen to you in

Endowment policies - these are the best selling policies among investors, endowment policies are those which offer cover for a specific term that has been opted by the insurer. On surviving the term, the policyholder receives the insured amount hence the premium payment is more with endowment policies. The returns are topped with bonus too. Endowment policies are broadly classified into two types - With-profit and Withoutprofit plans. ‘With-profit’ policy comes with the bonus declared by the Life Insurance Corporation from time to time. It is paid at the time of maturity of the policy. In a ‘Without-profit’ plan, the due amount is paid without any bonus announced by the Corporation, which otherwise is applicable with ‘With-profit’ plan. The premium rate charged for a ‘With-profit’ policy is therefore slightly higher. In a ‘Without-profit’ policy only the sum assured is offered.

an accident. Say if your cover were of Rs. 10 lakhs, your family would receive Rs. 20 lakh. Critical Illness Benefit Rider-on contracting illnesses such as cancer, kidney failure, heart attack, etc., the insurance company pays the insured amount. It has a maximum limit of Rs. 10 lakhs. Disability Benefit Rider-if you become permanently disabled and are unable to support yourself, the insurance company will provide you with an income up to a specified amount till the term end of your policy. However, the payment of the premiums may vary from a person to a person. The premiums calculated depend on various reasons, say a person has contracted a particular disease or has undergone a by pass surgery; the premium payment would increase thereby. One shouldn’t look at a policy only from the premium point of view. Always choose a policy with the features that suits your needs. At times it becomes difficult to say which policy is the ideal one. As days go by, there are new changes and with that arises new needs. At such times you

In Money back policies- a part of the sum assured

would need to choose policy that would aptly fit

is received by the policyholder, which is given by

into your then wants or better still keep upgrading

the insurance company at regular intervals, which

it. A single policy cannot meet all your needs hence

can be put to use for various purposes.

it is advisable to own couple of policies, which will

Pension schemes - are policies that offer money

have varied benefits suiting your requirements.

to the insured at the retirement age. If the insured

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dies during the term of the policy, his nominee will get the insured amount either in lump sum or every month.

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8 Mediclaim To have a Mediclaim policy is as important as

Rs

having a Life Insurance policy. A mediclaim policy

premium

provides for reimbursement of expenses incurred

medical insurance.

for hospitalization for the illness specified in the

By

policy purchased. It is a must-have for every

a small sum as

individual to be covered under a mediclaim policy

premium

as it takes care of the medical expenses when you

mediclaim policy

leave the hospital with a fat bill.

every

Apart from this, it also qualifies for tax benefits

can avoid huge

u/s 80D. The Income Tax Act provides for various

medical expenses

deductions for medical expenses incurred by a

during unforeseen

taxpayer. The deduction is for the premium paid

circumstances.

on the medical insurance policy taken by an

And when such premium also carries tax benefits,

individual for his own health or for the health

there is nothing that would make things better.

of his spouse, dependent parents or dependent

15,000/-

just

of for

paying on

year,

a one

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children are eligible for deduction. The following conditions will have to be satisfied to claim the deduction: • The mediclaim policy should be in accordance

with the schemes framed by the General



Insurance Corporation and approved by



the Central Government or any other approved



insurer.

• The premium has to be paid by cheque in

order to claim deduction.

• Such sum will have to be paid out of the

income chargeable to tax. This means that



if the premium is paid out of salary income



or any other income chargeable to tax, then



the deduction is available. Whereas if it is



paid out of agricultural income (exempt



from tax), then such premium is not eligible



for



income.

deduction

on

the

non

agricultural

Please note that Senior citizens (individuals >= 65 years of age have higher tax benefit of

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8 Small Saving Schemes Small Saving Scheme is a popular saving tool considering the benefits its offers. It is well liked due to the attractive returns it offers, atleast some would agree to it. National Saving Certificate and Public Provident Fund are the famous schemes as it qualifies for tax benefits. The high safety levels coupled with the attractive returns make small savings schemes a “must-have” plan among investors. Public Provident Fund (PPF): Investments in PPF earn a return of 8% per annum. The term of the plan is for as long as 15 years. The minimum investment under this scheme is Rs. 500 and maximum investment is permitted upto Rs. 70,000. An individual needs to invest regularly on a yearly basis to keep the account alive. Investors are required to make contributions

from investments in NSC are now fully taxable.

every year to keep their PPF accounts active thereby ensuring regular savings. Withdrawals from PPF are permitted only after completion of

Snapshot of Small Saving Scheme (NSC v/s PPF)

6 years. Its fluctuating interest can be considered an advantage or disadvantage, depending on the increased or decreased interest rates. Investments up to Rs. 70,000 per annum are eligible for deduction under Section 80C; further the interest earned is tax-exempt under Section 10 Savings

Certificate

(NSC):

NSC

Interest rate (p.a.)

8.00%

8.00%

Interest frequency

Compounded annually

Compounded halfyearly

Tax benefit on investment

Deduction under Deduction under Section 80C Section 80C

Tax benefit on interest Exempt under earned Section 10

of the IT Act. National

PPF

Nil

NSC

investments offer an interest rate of 8% per annum, which is compounded half-yearly. The term is fixed for a term of 6 years and hence it can be called as a fixed investment. NSC qualifies for tax benefits u/s 80C. The minimum investment is Rs. 100 and the maximum amount is Rs. 1,00,000. Interest earned from NSC was earlier exempt under Section 80L. However, Section 80L was omitted in Finance Bill 2005, as a result interest earnings

E.g. For instance, if your child is around 1-2 years of age, PPF is best suited. By the end of 15 years the money invested could be utilized for further education or marriage. NSC is comparatively a short-term investment. PPF works best for long term plan. Say if your daughter is expected to marry in 5-6 years, then you needn’t think twice for investing in NSC. ¨

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8 Home Loans To have a dream home is the vision of every man and purchasing it needs a great deal of money. And if at all you are hard on cash, don’t worry, now, home loans are at your rescue. What’s more, if you are paying for your home loans, you can avail tax benefits too. Take a look at how home loans help you in your tax benefits. Section 24 of the Income Tax Act, 1961 allows you to deduct the total interest paid on your loan from your taxable income of the same financial year. If you are residing in the house, which you took a loan for, is assumed as a self occupied property. In such a case, there is a maximum limit of Rs. 1,50,000 on this deduction. In such a

• As per Sections 80C read with section 80CCE of

situation the following becomes applicable:



the Income Tax Act, 1961 the principal



repayment up to Rs. 1,00,000 on your home

Interest paid on the home loan



loan is allowed as a deduction from the gross

As per Sec 24(b) of the Income Tax Act, 1961



total income

• A deduction up to Rs. 150,000 towards the

The second option is- if you have rented your house



total interest payable on the home loan towards

you can deduct the full interest amount against



purchase / construction of house property

rental income from that house.



can be claimed while computing the income

Let’s say you earn a monthly rent of Rs. 5,000. It



from house property

means that an annual rent income of Rs. 60,000

• The deduction stands reduced to Rs. 30,000 in

(5,000 per month x 12 months) is what you



receive. You will be able to deduct this amount i.e.

case of loans taken prior to March 1, 1999

• The

acquisition/construction

should

be

Rs. 60,000 rent against the amount that you have



completed within 3 years from the end of the

paid as interest.



financial year in which capital was borrowed

Tax benefits are available to both, the main applicant

• The person, extending the loan, confirms that

and the co-applicant. Joint applicants also qualify



such interest is payable in respect of the

for tax benefits. A loan taken for a residential house



amount advanced for acquisition or construction

is assessed under the head ‘Income from house



of the house or as refinance of the principle

property’. This will be eligible for deduction under



amount outstanding under an earlier loan taken

Section 24.



for such acquisition or construction

Home loans enable you to own a house, which

Principal repayment of the home loan

undoubtedly is an asset. So your tax payment is routed towards owing an asset.

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8 Capital Gains Bonds With Capital Gains Bonds, the options become

short term capital gains. Lets find out what can be

very limited. Though you have some choices here

done about it.

and there, the very existence of these bonds can

1. Invest in Capital Gains Bonds: Well, the best

still be questioned. The reason being, firstly, the

option is to make use of the bonds by investing

very poor interest rates offered on these bonds

in them. Investments in bonds issued by National

and the second one being, not enough option

Highway Authority of India (NHAI), and Rural

in the offing. So despite the low interest rates

Electrification Corporation (REC) are at present

and your concern to invest in them, there are no

eligible for capital gains tax savings under section

sufficient bonds in the market. So investors who

54EC. Gains made out of a capital transfer need

have sold their property before 30th September

to be invested in the above bonds within six months

2006 do not have a choice but to pay the taxes.

of sale of capital assets in order for the proceeds of

If you haven’t sold your property but will be doing

such sale to be exempt from capital gains tax.

it soon, then you need to understand some basics

Several exemptions are available from long term

of it.

capital gains, which reduce your capital gain tax

Capital gain arises when certain assets like

burden. In order to claim an exemption, the sales

property (plot or a built up commercial residential

consideration / capital gain arising from the sale

unit) or shares/mutual fund units/bonds etc are

of long term capital asset has to be invested within

sold for a profit. The treatment of capital gains is

a period of six months from the date of transfer of

slightly different from other sources of income as

the long term capital asset in specified bonds or

listed above. It mainly depends upon whether the

debentures or shares of public company or units of

capital gain (profit on sale) is short term or long

notified mutual fund.

term.

2. Consider other tax saving instruments: The

When you sell a capital asset like house property,

constraints in these bonds do not give you much

you earn an amount i.e. you gain capital on it.

freedom at your end. So another option that you

This capital, which you gain on the property sold,

can consider is to invest in other instruments like life

qualifies for the tax. If the property sold by you is

insurance, NSC, PPF or ELSS for that matter. With

held for less than 36 months, it qualifies for short

the limit capped at Rs. 1 lakh you can consider

term capital gain and if it is more than 36 months it qualifies for long term capital gains. If shares or other financial securities such as mutual fund units are sold within one year of purchase, the profit earned is treated as short term capital gain too. Short term capital gain is included in the gross taxable income like other sources of income and normal rates of tax apply, which depend on the gross taxable income from all sources including

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investing your capital gains in any of the above

allowed to invest anymore in the bonds.

tax saving tools.

So whether you save taxes by way of capital gains

3. Purchase Another Property: Another option

bonds or purchase of another property, bear in

available to the investor is to purchase another

mind the kind of risk you are willing to take. If you

property. It doesn’t matter whether the property is

are risk averse, choose the less risky options and

obtained or constructed as long as the transaction

vice versa.

sticks to the taxation laws. The benefits of these

¨

capital purchases are eligible for tax benefits under section 54 and 54F. However, this property must then be retained for a minimum period of 3 years to hold on to your capital gains. In case you sell the property for some or the other reason and before the completion of 3 years, you will have to pay taxes on your earlier as well as the existing capital gain. However, do note that the latest announcements made by the government mentions that it has extended the time limit for investment in capital gains bonds to March 31, 2007. Rural Electrification Corporation Ltd. (REC) and the National Highways Authority of India (NHAI) have so far issued capital gains tax exemption bonds for Rs 4,500 crore and Rs 1,500 crore respectively in fiscal 2006-07 and these bonds were fully subscribed in August 2005. Hence Finance Ministry has permitted REC to issue additional capital gain bonds for Rs. 3,500 and it has set a limit of Rs 50 lakh for each applicant. It means that people, who have invested more than 50 lakhs when the bonds were issued, will not be

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8 Bank Fixed Deposits After a continuous demand to include Fixed Deposits (FDs) as an eligible tool for tax benefit, the government has added bank fixed deposits in the list of tax saving instruments. So an investor seeking to save on taxes can invest in bank fixed deposits and can claim tax benefit under section 80C provided, the deposit is locked in for a period of 5 years. Following this acceptance, banks have made several offering with interest rates of 8% per annum and upto 9% for senior citizens. In a gist, while investing in FDs, an investor needs to keep a few things in mind. He/she should know that the interests earned on these deposits are taxed. The reason being the abolishment of the 80L Section of the Income Tax Act 1961, which permitted an exemption upto to a limit of Rs. 12,000. But with the abolishment of this section the interest earned on such tools are now taxed as they fall under the category of ‘income from other sources.’ According to the current guidelines, a bank deducts TDS for an investor when the interest exceeds Rs. 5,000. May be the forthcoming budget would have something new to offer, so lets wait and watch to know what it would offer this time.

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8 Infrastructure Bonds Tax saving bonds offer various concessions and

IDBI, brought out in the name of ICICI Safety Bonds

tax-breaks. Tax-free bonds offer tax relief under

and IDBI Flexibonds. These provide tax-saving

Section 80C of the Income Tax Act, 1961.

benefits under Section 80C of the Income Tax Act,

However, these bonds do not hold the charm

1961, up to an investment of Rs.1, 00,000, subject

to attract a lot of investors because of low or

to the bonds being held for a minimum period of

perhaps dipping interest rates. Infact, there has

three years from the date of allotment.

been not much improvement or action in the

Now, after having read it all the way through,

infrastructure bonds segment. Though these serve

its time for you to take a call on this and decide

the appetite of risk-averse investors, these bonds

accordingly and if nothing works in your favour,

still do not appeal much when it comes to returns.

you have no option but to pay your taxes!!!

One reason being, the government governs these

¨

bonds as in the case of NSC and PPF. The returns as mentioned above are appalling and so are the post-tax returns, which keeps dipping especially for the investors in the highincome group. Instead with a little risk bearing on your side, you can make investments in equity-oriented investments, also known as Equity Linked Saving Schemes. With the lock in period of 3 years you can make reasonable returns too. However, the performances of the funds are the mercy of the stock market. So if you want good returns you have to take some amount of risks. However, risk-averse investors can anytime consider investing in infrastructure bonds provided they are looking for a shorter lock-in period and are willing to compromise on returns in the process. Do remember that the interest rates on infrastructure bonds issued last year were as low as 5.50% for the non-taxable income group. And the post tax returns kept dipping as an investor moved to the high-income group. Those falling in the bracket of highest income tax payer, the returns were absurdly low at 3.82%. If you want to invest in them, infrastructure bonds are available through issues of ICICI Bank and

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