Evaluating an endowment policy for its fairness against other tax saving options in India such as PPF, EPF and even FDs
Or am missing something?  Yes. The rate of 8.53 is illustration. There is no guarantee that the rate will be applicable. My yearly premium is Rs. 26289. On this amount I will save tax of Rs. 7887. So net premium is Rs. 18402. The other way to look at this is invest Rs 26289 [or actually less of Eq Term Deposit premium]. If you invest into Eq Term Deposit [lock-in for 6 years] with tax benefits, your numbers are going to be very different and definitely better than LIC returns. Edits:
Many a time even if the tax is deducted and paid by the company it does not reflect as a credit against your PAN for various reasons like, you not submitting it to your employer in time, errors of reconciliation, etc. Its advisable that you inform your company finance officer that you have received such a letter. Q1. The sure shot way of knowing that your company is depositing tax with government is to view your tax credit report. This was set-up in 2004 and gives the details of all credits against your PAN and the tax deducted against your PAN. It shows if the tax was TDS and which employer paid it, or if this was a self assessment, or TCS, etc.  To view this report there are 2 options:  Register directly at http://www.tin-nsdl.com/panregistration.asp.  Follow the one time registration process and keep viewing the tax credits. Note it normally takes 2-3 months to reflect the data.  The other alternative is that quite a few leading banks [Citi, SBI, etc] provide a direct access to this report from their internet banking frontend, provided your PAN is associated to your account. Q2. The only details you need to submit are the Form 16. This would have all the details of when the tax was paid and the BSR number required for reconciling. Q3. TDS is the liability of the employer. However if this has not been deducted or too little was deducted based on incorrect/incomplete information give by you, then its your liability. For example if you change jobs in a year, the tax deducted is always less and you have to pay the difference. Q4. If its established that the company was at fault for not deducting the tax or deducting and not paying it to government on time, there are enough provisions to penalize the company including putting the top management team behind bars. Both you and the Company were probably benefitted by this decision.  Specifically an option grant that was not FRV or more would require you to recognize the option as income whether you had exercised it or not.  Additionally a host of other 409A tax issues/penalties could have been levied against you as an employee recipient.  I certainly appreciate your concern about a change in compensation, but this is one where Corporate America likely saved your bacon. Like azam pointed out, fundamentally you need to decide if the money invested elsewhere will grow faster than the Interest you are paying on the loan. In India, the safe returns from Fixed Deposits is around 8-9% currently. Factoring taxes, the real rate of return would be around 6-7%. This is less than what you are paying towards interest. The PPF gives around 9% with Tax break [if there are no other options] and tax free interest, the real return can be as high as 12-14%. There is a limit on how much you can invest in PPF. However this looks higher than your average interest. The stock markets in long term [7 Years] averages give you around 15% returns, but are not predictable year to year. So the suggest from azam is valid, you would need to see what are the high rate of interest loans and if they accept early repayment, you should complete it ASAP. If there are loans that are less than average, say in the range of 7-8%, you can keep it and pay as per schedule. If you were NRI during the period you earned the income, its tax free in India and you can bring it back anytime within 7 years. There is a limit on total amount but its quite huge. If you were not an NRI during that period [when you earned in US] then whatever you have earned is taxable even in India, it does not matter whether you keep the funds in US or bring it back to India. You get the benefit of Double Tax and can deduct the tax already paid. From a federal tax point of view, withdrawals from 529 plans are treated as taxable unless they are used on qualified expenses: The part of a distribution representing the amount paid or contributed   to a QTP does not have to be included in income. This is a return of   the investment in the plan. The designated beneficiary generally does not have to include in   income any earnings distributed from a QTP if the total distribution   is less than or equal to adjusted qualified education expenses   (defined under Figuring the Taxable Portion of a Distribution ,   later). [...] To determine if total distributions for the year are more or less than   the amount of qualified education expenses, you must compare the total   of all QTP distributions for the tax year to the adjusted qualified   education expenses. You'll have to include them in your income and pay normal income tax on them, and also in most cases pay an extra 10% penalty: Generally, if you receive a taxable distribution, you also must pay a   10% additional tax on the amount included in income. You'd have to check on the situation from a state perspective but I'd imagine it's quite similar. The basic point is that non-qualified distributions are treated as earnings. There are lot of options. I personally avoid keeping money in bank accounts and invest in one of the funds. It's just my personal opinion, you can ask your Ulamas I believe you are talking about Public Provident Fund and National Savings Certificate schemes in India. PPF -> Deposit money -> If you want to take a loan after 3 years, you can take out 25% of the balance in your PPF account. NSC -> Money locked for 6 years and can only be encashed after 3 years, you cancel your deposit and encash all your money. Money is safe in both cases, because they are secured by the Indian government. But interest(8.75% at present for both in 2014-15 financial year) is compunded anually for PPF, but half yearly for NSC. So you get a higher interest rate in case of NSC. So if you can lock in your money, without any need for withdrawls, choose a NSC for higher returns. Tax rebate wise, both are same. What makes you think anything would change? If they allowed Match money to be distributed tax free, they are missing out on a future tax revenue opportunity.  I think the more likely way they would stick it to us is to sunset the Roth 401(k) all together and make plans go back to the old school pre-tax and after-tax only, where even the earnings on after-tax are taxed at distribution.