The article talks about tax breaks on tax-saving instruments. In a hurry to exit investments, taxpayers overlook the fact that they may have to forego all tax breaks that they have claimed through tax-saving instruments.
Vaibhav Sankla, director, with tax consultancy firm H&R Block, suggests that before making any decision about investing for tax-saving, one should ensure that whether the investment can be encashed or redeemed before its maturity or lock-in period or not. At the same time, you should analyse the tax implications of these instruments.
The article clearly mentions tax benefits under section 80C and circumstances that can lead to revocation of these tax benefits.
Many taxpayers are unaware that they will have to forego tax benefits claimed earlier in case they withdraw the money from EPF account before 5 continuous years of employment.
Referring to life insurance policy, Sankla points out that deduction (u/s 80C) on life insurance premium paid will be rolled back in case the policy is terminated within two years of issuance.
Generally, elderly people tend to invest in Senior Citizens Savings Scheme. But, most taxpayers do not realise that they will have to surrender tax exemption claimed earlier on premature withdrawal of money from the scheme. Ultimately, the tax relief claimed during the period will be treated as income in the year of withdrawal.
Source : Economic Times