Skip to main content

Tax Planning via investment under the Income tax Act 1961

Invest In Tax Saving Mutual Funds Online

 

Tax planning through the investment route, under the Income-tax Act, 1961 (IT Act), has a wider scope than the commonly known Section 80C benefits

TAX-SAVING measures exist in many forms, from availing certain types of loans, buying certain types of insurance policies, making specified investments to making donations to approved charities. Among these, one tends to favour the investment route due to the prospects of returns and creation of wealth over the long run.

Tax planning through the investment route, under the Income-tax Act, 1961 (IT Act), has a wider scope than the commonly known Section 80C benefits. Tax on investments is done in three ways based on the type of financial instrument, the time of subscription, accrual of income and maturity of the instrument. It is essential to understand each instrument for effective tax planning within one's overall financial plan.


Tax planning under exempt exempt exempt (EEE) route:

Under the EEE route, there is a tax benefit at every stage of investment. Under Section 80C of the IT Act, investments such as public provident fund (PPF), equity-linked savings scheme (ELSS) and life insurance policies qualify under the EEE route. For instance, the investor gets a tax break of up to Rs 1,00,000 for making a contribution in PPF; the interest earned during the tenure of the fund is tax-free and when the investment matures after 15 years, the corpus is also tax-free.

Additionally, under Section 80CCG of the IT Act, the Rajiv Gandhi Equity Savings Scheme is an incentive for first time stock market investors having an income of Rs 10,00,000 or less. Under this provision, an individual has an opportunity to avail a tax deduction of 50 per cent of the amount of invested subject to a maximum of Rs 50,000. Such benefit is over and above the deduction of Rs 1,00,000 available under Section 80C.


Tax planning under exempt exempt tax (EET) route:

In EET instruments, while the first two stages of investment are exempt, one pays a tax at the maturity stage. So, the first step, or your contribution, enjoys a tax break, but subsequently, either during the tenure, or on maturity, you need to pay a tax on your gains.

For example, in case of an investment in National Savings Certificate VIII issue (NSC) six years, investments up to Rs 1,00,000 qualifies for deduction under Section 80C of the IT Act.


The NSC interest is taxable, however, as it is a cumulative scheme (that is, interest is not paid to the investor but instead accumulates in the account), each year's interest, except for the last year, is considered as reinvested in the NSC and qualifies for a fresh deduction under Section 80C of the IT Act. It should be noted that the interest income for all years except the last year is reported as `Income from other sources'. Finally, on maturity, the principal amount is tax-free. However, the final year's interest does not receive a tax deduction, as it does not get reinvested.


Tax planning at a single stage of investment:

Under this route, tax benefit may be partially or completely available at one stage of investment, that is, either on subscription, or income accrual stage, or maturity/sale. Some examples for the same are gains arising from sale of capital assets are exempt where the same are invested in residential property/ specified bonds issued by the government, and also fixed deposits with a tenure of five years.

Under Section 54 of the IT Act, where a house property held for long term is sold and seller entirely utilises such capital gains for purchasing a new house, then capital gains on the sold property will not be chargeable to tax during that financial year.

Investment based tax exemptions and a deduction on investments is to incentivise individuals to save more tax and channelise their savings towards long-term investing benefits. Where the prescribed conditions mentioned for availing a deduction during a particular financial year is violated or not fulfilled in any specified financial years, then such deduction would be deemed as one's income during such year of violation and added to their total income.

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 in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

These links can be used to Purchase Mutual Funds Online that are regular also (Investment, non-tax saving)

Download Tax Saving Mutual Fund Application Forms from all AMCs

Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

Some of the best Tax Saving Mutual Funds available ( ELSS Mutual Funds )

  1. ICICI Prudential Tax PlanInvest Online
  2. HDFC TaxSaverInvest Online
  3. DSP BlackRock Tax Saver FundInvest Online
  4. Reliance Tax Saver (ELSS) FundInvest Online
  5. Birla Sun Life Tax Relief '96 Invest Online
  6. IDFC Tax Advantage (ELSS) FundInvest Online
  7. SBI Magnum Tax Gain Scheme 1993Invest Online
  8. Sundaram Tax SaverInvest Online
  9. Edelweiss ELSS Invest Online

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

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 MutualFundsInvest 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 ...

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...

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 ...
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