LEGAL
BUT LITTLE KNOWN WAYS TO SAVE TAX
LET
YOUR MARRIED CHILDREN BENEFIT
In 1985, I was advised by a sage to save money legally
through the Post Office (PO), using what is called the POMIS-PORD Scheme. Like most of
us, bar some, I did not have the money to invest, but I managed Rs. 21,000. The
scheme was simple: Invest up to Rs. 1,06,000 in the Post Office Monthly
Interest Scheme, or POMIS. This was a 6-year
scheme, with 15% interest. On investment, you got a legal kickback of 01% of
the sum invested, the ubiquitous tout took 01% and the PO Manager 0.5%. On maturity,
you got a 20% bonus of the sum invested.
PORD stands for PO Recurring Deposit, a 5-year scheme. You had to open an RD Account with that Post Office
and none other. Obviously, this would be at least ONE DAY prior to your depositing the POMIS corpus. At the 5-yr stage, you
needed a one year extension. Interest rate on PORD was 13.5%. ROI was a
staggering 23 % pa. Thankfully, both are 5 year schemes today.
On the POMIS form, you issued a standing instruction to
transfer the monthly amount into your PORD account. 59½ months later, you
increased PORD tenure by one year. The good thing was that these accounts were
transferable from place to place.
Things have changed. Interest rates have almost halved, Post Offices have access to the Internet, etc. Sec 80 of the ITA ‘61 allows you
non-taxable interest of Rs.7,000 if from a joint account and Rs. 3,500 if solo
in the Post Office. This means that you can invest only Rs. 82,000 in the POMIS
as interest rate is 8.5% (Rs. 6,970 pa or Rs. 580 pm). PORD offers 8.4% compounded quarterly, unlike
PPF which is a yearly interest rate set up. 82K is not a major
sum in itself, but ROI exceeds 10.5%. This is the HIGHEST ROI in a Govt agency,
beating PPF, even though the tout has been banished and the 20% bonus dropped. The PORD income i.e., Profit is taxable and should be reinvested in another POMIS-PORD or ELSS Mutual Fund like Franklin Templeton Taxgain, or an MF of your choice. There is NO TDS on the PO schemes, so maximise utilisation of this rare facility. Have a dekko at the numbers below.
My suggestion is that you should open the POMIS-PORD or the PORD account in
the names of your newlywed kids, which is the phase we are transiting inst.
This would be in the nature of a gift, which is non-taxable in the donee’s
hands vide Section 56(2) ITA 61 as modified in Oct 2009, and also on weddings.
Numbers:
POMIS
Investment: Rs. 82,000
Monthly
transfer to PORD: Rs. 580
PORD final
return = Rs. 43,300.
Overall
return = Rs. 125,300.
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