Make Money & Save On Tax

Except for Equity Linked Savings Schemes (ELSS), all tax saving investments are fixed return. It is interesting to see how in the peak of a bull run, fixed return investments are scorned by investors. Why park your money in a place that gives you a meagre return when the bulls are galloping ahead to give you 60 per cent per annum? Go back to the five-year period from 1998 to 2002. The Sensex rose wildly and then fell to almost the same level. During these five years, your money would have stagnated in the stock market. If, instead, you had invested in a fixed deposit where you were earning 11 per cent or 12 per cent per annum (which was the rate then), you would have seen your money go up by about 75 per cent. However lucrative the stock market, it is risky. So in every portfolio it makes sense to allocate some amount of money to fixed return instruments. And, if you can avail of the tax benefit while doing so, so much the better. Five-Year Bank Deposits Lock-in period: Minimum 5 years Safety: High Instrument: Fixed return Annual return: Depends on market interest rates Limit: None This has been the latest addition to Section 80C. And, for those who love depositing money in the local bank, this one is a real boon. But do make careful note that any deposit with a tenure of less than five years will no

This article was originally published on December 12, 2006.