Skip to main content

Make your tax investments work for your life goals

   Did you know your investment in the Public Provident Fund (PPF) will fetch you a return of 8% only if you deposit the money before the 6th of every month? In case of cheque payments, ensure your cheque gets cleared by this date. Hold on for a second. Why are we boring you with tax-saving tips in April — after all, you have the luxury of another seven to nine months for tax planning? Well, if you want to make every penny count, capitalise on your PPF investment or avoid buying last-minute expensive insurance, start investing now. You have to follow a systematic approach to tax planning if you want to make gains from these investments than merely save on taxes. "The best thing for an investor to follow is to invest in tax-saving instruments from April itself. The salaries shrink in the months of January and February. Investing the balance funds for savings taxes will tighten cash flows.

ALIGN PLANNING WITH GOALS

Investors should link their tax saving with their investment objective. For instance, they should not buy an insurance policy to save tax. But if they need insurance, then they should definitely consider that as it will also save tax.

USE THE BEST PPF & NSC COMBO

The most attractive feature of PPF is a tax-free return of 8%, which is compounded on an annual basis. For example, if you invest . 10,000 every year for 15 years your corpus adds up to . 2.93 lakh at maturity. This entire sum is tax-free in the investors' hands as per Section 80C of the Income Tax Act. Apart from a post office, a PPF account can also be opened in State Bank of India (SBI) and its associates and other select nationalized banks. The minimum and the maximum amount are capped at . 500 and . 70,000 respectively. The rate of interest for an NSC is 8% (compounded half yearly). If you invest . 1,000, the amount grows to . 1,601 in six years. You can opt for a judicious mix of NSC and PPF so as to benefit from the interest rate movements in either direction. The interest rate is revised at regular intervals on PPF, whereas an individual can lock in his money at a single rate for six years in an NSC. For example, in a falling interest-rate scenario, you may end up pocketing a better rate on PPF than an NSC. However, if the interest rates were to move upward, NSC would be a more rewarding. However, do remember that interest earned from NSC is taxable even though there is no TDS.

HIGH SALARIED SHOULD AVOID NSC

The net return earned from NSC becomes less attractive for individuals who fall in the high tax bracket. If an individual falls in the 30% tax bracket, he earns only 5.6% return as against 8%. Even as we are inching towards 0% inflation, retail inflation is still at around 9-10%.

ELSS COMES WITH A RISK FACTOR

While PPF and ELSS are two good choices when it comes to saving tax, the former has poor liquidity and investment in the latter involves higher risk. Investors should understand the product, and set their goals first and invest in available tax-saving instruments based on their risk appetite. If the new DTC (Direct Taxes Code) is implemented, as proposed, then ELSS will no more be eligible for deduction under Section 80C. Those investing through SIP should mention the end date March 2012 in their application form. Do not extend the ELSS beyond March 2012 unless there is some changes in DTC. Also, opt for the growth option in ELSS.

GO FOR JOINT HOME OWNERSHIP

There is no choice when it comes to buying a house in the city. Rising real estate prices have pushed couples to apply for joint home loans. But even if you are not looking to own a house in the city, you can invest in a house in some other city and gain from tax-saving on joint loans. Just taking a join loan (co-borrower in banker's parlance) won't make you eligible for tax breaks. Both of you can avail tax benefits on the home loan only if both of you are the co-owners of the property. You have to consider the repayment capacity of each spouse while deciding the share of the loan. So, a couple can be equal owners but if their share of the loan is in the ratio of 60:40 or 70:30, the tax benefits would be shared in that proportion. Ideally, an individual in the higher tax bracket should opt for a higher ratio of the loan to save on more taxes.


You have to get a break-up of share of the loan on a stamp paper at the beginning itself. Co-borrowers should enter into a simple agreement with the spouse on . 100 stamp paper. This agreement should basically contain the share of the ownership along with that of the home loan availed of by the couple. You need two copies of the certificate from the housing finance company (HFC) and each of you can submit copies of the certificates along with a copy of the agreement signed between the two of you. The maximum tax deduction available for a single borrower is . 1.5 lakh. This deduction would apply to each borrower, hence the total possible deduction adds to . 3 lakh. Each borrower has to provide a copy of the borrower certificate to claim his or her respective tax relief. However, there are no clear guidelines on this matter. So, it is possible for either of the borrower to miss out on the tax rebate. In such cases, they can claim it as a refund while filing tax returns.


The idea is not to treat tax savings in isolation. It should be in line with you financial goals. Buy a PPF only if you have some goal to be fulfilled after 15 years. Buy a house only of you want to stay in it or invest in real estate and look at insurance only for protecting your family.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

Leave your comment with mail ID and we will answer them

OR

You can write back to us at PrajnaCapital [at] Gmail [dot] Com

 

---------------------------------------------

Invest Mutual Funds Online

Transact Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Fund Application Forms

Best Performing Mutual Funds

    1. Largecap Funds Invest Online
      1. DSP BlackRock Top 100 Fund
      2. ICICI Prudential Focused Blue Chip Fund
      3. Birla Sun Life Front Line Equity Fund
    2. Large and Midcap Funds Invest Online

      1. ICICI Prudential Dynamic Plan
      2. HDFC Top 200 Fund
      3. UTI Dividend Yield Fund
    1. Mid and SmallCap Funds Invest Online

      1. Reliance Equity Opportunities Fund
      2. DSP BlackRock Small & Midcap Fund
      3. Sundaram Select Midcap
      4. IDFC Premier Equity Fund
    1. Small and MicroCap Funds Invest Online

      1. DSP BlackRock MicroCap Fund
    1. Sector Funds Invest Online

      1. Reliance Banking Fund
      2. Reliance Banking Fund
    1. Tax Saver Mutual  Funds  Invest Online
      1. ICICI Prudential Tax Plan
      2. HDFC Taxsaver
      3. DSP BlackRock Tax Saver Fund
      4. Reliance Tax Saver (ELSS) Fund
    2. Gold Mutual Funds Invest Online

      1. Relaince Gold Savings Fund
      2. ICICI Prudential Regular Gold Savings Fund
      3. HDFC Gold Fund

 

 

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

What is Financial Freedom?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)     There were many things common between our Freedom fighters. All had the Single vision (Free India), common goal (independence) and had a disciplined and focused approach. They were ready to do anything and everything and had made so many sacrifices to see India free . But the road to freedom was not easy .They had faced lot many hardships, went to jail so many times and even confronted physical and mental torture from the British. There was one more thing which proved to be an advantage to our fighters that most of them were professional lawyers. The knowledge of legal issues and its impact on our country at large has helped them counter various bills and proposed new laws by the then government. It is due to their continuous effort that we are able to achieve the goal of Independent Indi...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now