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Tax Saving Plans - A Few Tax Saving Tips to Save the Day

There are plenty of investment options available which would help you in tax saving plans. Considering the current market scenario and the rate of returns, we have listed out a few options which can be a boon if your objective is tax saving and at the same time get good returns on your investments.<br>

MihirShah
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Tax Saving Plans - A Few Tax Saving Tips to Save the Day

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  1. Tax saving Plans

  2. A FEW TAX SAVING TIPS TO SAVE THE DAY

  3. There are plenty of investment options available which would help you in tax saving. Considering the current market scenario and the rate of returns, we have listed out a few options which can be a boon if your objective is tax saving and at the same time get good returns on your investments. Let’s have a look at some of the tax saving plans.

  4. ELSS (EQUITY LINKED SAVINGS SCHEME): • ELSS is an equity fund where more than 65% of its funds is invested into equity. • You can invest as much as you wish in this scheme however maximum deduction is allowed up to Rs. 1,50,000 under the limits of Section 80C, 80CCC and 80CCD. • The lock in period is of 3 years making it more liquid as compared to the PPF and NSC • You can opt for Dividend payout option or dividend reinvestment option. • If your aim is liquidity than you should opt for dividend payout option which acts as a profit-booking mechanism. The dividend you receive would be tax free in your hands. • Capital gains arising on sale of ELSS funds at the end of the 3 years lock in period is exempt from tax. • ELSS is at top of our charts since it gives a return of almost 27.30% (Past three years) and is not matched by any other investment schemes.

  5. ULIP (UNIT LINKED INSURANCE PLAN): • A Unit Linked Insurance Plan (ULIP) is a product offered by insurance companies that unlike a pure insurance policy gives investors the benefits of both insurance and investment under a single integrated plan. • Maximum deduction allowed up to Rs. 1,50,000 (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCC and 80CCD) • The investor can use ULIP as rebalancing tool by switching between equity and debt. • Investing in ULIP can be beneficial if you are looking for a long term and stable investment plan because a short term plan may not be able to recover the high fund management charges in the % initial years. • The average return for ULIPs vary from 7.8% to 9.7% (Past five years)

  6. PPF (PUBLIC PROVIDENT FUND): • PPF Is an attractive option if you want maximum safety, tax savings and lowest maintenance cost however the downside of it is the low returns as compared to the rest of the options & low liquidity. • Rate of return on PPF is 8.7% as of now, but since PPF is linked to the government bond yield, the rate could go down in the coming years. • Only an individual can open and invest in a PPF account. HUF can not open a PPF account. • Minimum Rs.500 has to be invested every year and maximum upto Rs.1,50,000 can be invested in the PPF account every year. The amount invested can be claimed as deduction under section 80C up to the maximum limit of Rs.1,50,000. • The interest earned on the deposit amount in PPF is completely exempt. • The maturity period of the amount invested is 15 years. However you can make a premature withdrawal from the 7th year onwards subject to certain ceiling limits.

  7. TAX SAVING SCHEMES FOR SENIOR CITIZENS: • If your age is more than 60 years, Senior Citizen’s Savings Scheme is an ideal tax saving option for you. • Your money is safe with the banks and at the same time you can enjoy the liquidity. • The return is marginally higher than the Five year government bond yield. • The interest earned on this scheme will be taxable. • Maximum deduction allowed up to Rs. 1,50,000 (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCC and 80CCD). • Unlike PPF, interest rate will remain unchanged until the maturity of your investment.

  8. INSURANCE PLANS: • Insurance plans are basically aimed at providing you insurance cover and tax saving plans at the same time but from the point of view of return, they are the worst way for tax saving. • The positives of the insurance plan is that the income is tax free and you can get a loan against such policy which would help you in a liquidity crunch. • Maximum deduction allowed up to Rs. 1,50,000 (Subject to overall limit of Rs. 1,50,000 under Section 80C, 80CCC and 80CCD) • Source: https://quicko.com/blog/tax-saving-tips/

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