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

Mutual Fund Exit Load Changes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 Mutual Fund Exit Load Changes AMCs don't communicate about any change in exit load directly with investors, but do update on their website   The exit load applicable to your investments is the load which existed at the time when you invested in the particular fund. Any subsequent changes in the exit load will not be applicable to your investments.   However, Asset Management Companies ( AMCs ) periodically publish addendums in the newspapers, which state any change in exit loads of specific schemes managed by them. Such changes are also posted on their websites. However, a direct communication to an investor is not made, considering the costs involved in doing so. In their own interests, investors should not only track the performance of the funds they i...

Birla Sun Life Mutual Fund Launches Birla Sun Life NIFTY ETF

Birla Sun Life has launched a new fund namely, Birla Sun Life Nifty ETF, an open ended exchange traded fund. The new fund will be open for subscription from 4th July to 18th July 2011, at an offer price of Rs 10 per unit. The investment objective of the scheme is to generate returns that closely correspond to the total returns of securities as represented by S&P CNX Nifty, subject to tracking errors. No exit load will be charged under the scheme. The performance of the scheme will be benchmarked against S&P CNX Nifty and will be managed by Satyabrata Mohanty.   -----------------------------------------------------------------   Also, know how to buy mutual funds online:   1) DSP BlackRock Mutual Funds: http://prajnacapital.blogspot.com/2011/05/buying-dsp-blackrock-mutual-funds.html   2) Reliance Mutual Funds: http://prajnacapital.blogspot.com/2011/06/buying-reliance-mutual-funds-online.html   3) Birla Sunlife Mutual Funds: http://prajnacapital.blogspot.com/2011/...

Atal Pension Yojana contribution Tax Benefit for spouse

Contributions to Atal Pension Yojana (APY) are eligible for the same tax benefits as the NPS. This means that the contributions can be claimed under Section 80CCD (1B). The current limit for Section 80CCD (1B) is   Rs   50,000, over and above the   Rs   1.5 lakh limit under Section 80C. Section 80 CCD (1) is a different one, meant to cover employers' contribution towards NPS . You cannot get tax benefit by investing in the name of your spouse under Section 80 CCD . ------------------------------ ----------------- Invest Rs 1,50,000 and Save Tax under Section 80C. Get Great Returns by Investing in Best Performing ELSS Mutual Funds Top 10 Tax Saver Mutual Funds to invest in India for 2016 Best 10 ELSS Mutual Funds in India for 2016 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. Religare Tax Plan 4. DSP BlackRock Tax Saver Fund 5. Franklin India TaxShield 6. ICICI Prudential Long Term Equity Fund 7. IDFC Tax Advantage (ELSS) Fund 8. Birla Sun Life Tax Relief 96 9. ...

Mutual Fund Reivew: Birla Sun Life Asset Allocation Conservative

Birla Sun Life Asset Allocation Conservative has numbers on its side to prove its credibility… Don't be surprised to find this Fund of Funds ( FoF ) in our recommendations. It has earned its place. And despite the difference in the structure of the product, there is no arguing with the numbers.   Of the total 6 years of its existence, the fund has been among the top 10 funds in its category in four of them. Last year it put up an average show and the only year it underperformed its peers was in 2008.   One aspect to look at when investing in an FoF is the expense ratio. The expense ratio of an FoF is capped at a lower limit of 0.75 per cent (2.50% for an actively managed fund). However, the FoF not only has its own expense (though lower) but even the expense ratio of the fund it is investing into. Fortunately, the fund manager takes that into account. "Expense is one of the important criteria used for fund selection and is the main reason for our investment in BSL Ind...

Short-Term Investment Options in Mutual Funds

Mutual funds offer liquid funds and ultra short term funds in the debt category, which are suitable for short investment periods. Ultra short-term funds were earlier known as liquid plus funds. Liquid funds invest in money market instruments with a maturity of 91 days or less. However, there are no such restrictions for ultra short-term funds. Who should invest in these? These are open-ended schemes. Investors with a short investment horizon or with surplus cash and low risk appetite should look at these. These could include corporate as well as retail investors. Those interested in staying invested for less than 15 days can opt for liquid funds. Retail investors who want to remain invested for two-four months, can look at ultra short-term funds. The short duration for both liquid and ultra short-term funds shields them from any interest rate volatility.   What kind of returns do they offer? In terms of an investment period less than 15 days, these funds are comparable to a ba...
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