Remember the date 11th January 2021? R. Ashwin & Hanuma Vihari faced 258 deliveries and blocked what ever was thrown at them. They helped India draw the third Test match. What a overall performance it was. This lead, boosted by a newly gained self-assurance, to a strong win in the fourth Test match.
I’m speaking about it for the reason that Tax saving investment is a lot like a cricket Test match. You program ahead and play lengthy innings. Whatever is becoming thrown at you- bouncers like Covid-19, spin-balls like retirements, or yorkers like financial downturns- if you preserve playing, there is practically nothing that can cease you from becoming a winner.
Tax Planning is a essential aspect of your monetary program. Section 80-C and 80-CCD of the Income Tax Act have remained the most preferred possibilities for the reason that they are easy to realize.
Here are the 11 batsmen of the investment planet that can support you save taxes and boost your wealth:
Equity Linked Saving Scheme: ELSS are the game-changers. They give much better overall performance in quick term and are outcome-oriented. ELSS funds are equity-oriented mutual funds with a lock-in period of 3 years which is the shortest amongst all tax saving schemes. For the goal of tax deductions, you can invest up to Rs 1.5 lakhs.
Employees’ Provident Funds and Public Provident Funds: Batsmen quantity 2 and 3. EPF and PPF are All-rounders of a tax-saving portfolio. A fantastic tax saving choice as it qualifies for deductions up to Rs 1.5 Lakhs per annum below section 80C of the Income-tax act. Additionally, it guarantees decent returns of 7–9%. One of the safest investment possibilities as they are managed by the government of India, EPF and PPF delivers tax exemption on the principal quantity, interest earnings and maturity earnings. The only drawback is that PPF has a tenure of 15 years, so it is not appropriate for the quick term.
Sukanya Samriddhi Scheme: If you have a girl youngster beneath 10 years, go for Sukanya Samriddhi Yojna. It is a government-backed scheme to encourage parents to invest in the girl child’s future. You can claim a deduction of up to Rs 1.5 Lakhs below section 80C of the Income Tax Act. Apart from the principal invested, even the interest earnings earned is exempt from tax. The only caveat is you can not invest in this scheme for more than two girls.
National Pension Scheme: NPS is a government-sponsored pension program, regulated by the Pension Funds Regulatory and Development Authority. In addition to the Rs 1.5 Lakhs deduction below 80-C, Individuals can claim more Rs 50,000 tax deduction below section 80CCD (1B). NPS makes it possible for non-government sector folks to save and program for their personal retirement.
Money is managed in 3 separate accounts obtaining distinct asset profiles viz. Equity (E), Corporate bonds (C) and Government securities (G). Investors can opt for to handle their portfolio actively (active selection) or passively (auto selection). NPS delivers really a handful of possibilities and is advantageous for folks with varying threat appetites.
Unit Linked Insurance Plan: ULIP offers investors each insurance coverage and investment below a single integrated program. Investment in ULIPs is eligible for tax advantage up to a maximum of Rs 1.5 lacs below Section 80C of the Income Tax Act. Maturity proceeds are also exempt from earnings tax. There is a caveat: the sum assured or the minimum death advantage will have to be at least 10 instances the annual premium. If this situation is not met, the advantage below Section 80C is capped at 10 per cent of the sum assured although the maturity proceeds will not be exempt from earnings tax.
Life Insurance: You can claim a deduction for the premium paid for your life insurance coverage policy. Premium paid for a life insurance coverage policy can be claimed below the Rs 1.5 Lakh ceiling in section 80C. Same as ULIP, to avail of this advantage the insurance coverage cover will have to be 10 instances your premium quantity.
National Savings Certificate: NSC is an desirable choice for threat-averse investors. While there is no maximum limit for investment, the maximum deduction that can be claimed is Rs 1.5 Lakh below section 80C. NSC has a lock-in period of 5 years.
Fixed Deposit: A 5-year tax-saving fixed deposit is certified for deduction up to Rs 1.5 Lakhs below section 80C. It is one of the most sought-immediately after tax saving possibilities for senior citizens and retirees. However, TDS is applicable to the interest earned.
Interest Income on savings account: Income on a savings account is exempt from tax up to Rs 10,000 for folks beneath 60 years of age. For senior citizens, interest earnings up to Rs 50,000 is exempt from tax.
Senior Citizen Savings Scheme: SCSS is for the senior citizens (60 and above) of India, retirees who have opted for the Voluntary Retirement Scheme (VRS) or Superannuation in the age bracket 55-60 and retired defence personnel with a minimum age of 50 years. An person can invest a maximum quantity of Rs15 lakh or the quantity received on retirement, whichever is decrease, in an SCSS account. The scheme delivers a standard stream of earnings with tax-saving advantages.
NPS, ULIP, NSC and Life Insurance are the middle order batting line up. They are steady players that support in the lengthy run. They take probabilities only when the dangers are manageable. A strong middle order is the backbone of any group.
FDs, SCSS and Interest on savings accounts are the tail-enders. They are essential to bat till the final ball. A confident and determined tail-ender brings dwelling the trophy.
There are some pointers to preserve in thoughts, although. Avoid becoming overly aggressive immediately after one point. If you have larger threat-taking capabilities, there are investment possibilities other than tax-savings to look into.
by Tushar Bopche, Product Head – AUM Business, YES SECURITIES