Skip to main content

Which tax saving scheme you should invest this year

Invest In Tax Saving Mutual Funds Online

Call 0 94 8300 8300 (India)

Suggest a good tax saving scheme…asked Manav a very old friend who usually visits me every year in January just for this question. His salary package is good and thus in the name of tax saving scheme he has only one choice i.e Employee provident fund. His EPF contribution normally overflows the basic requirement of tax saving investments u/s 80C. But still as he follows my various tax planning tips so deploying the funds into various suitable tax saving schemes becomes inevitable.

Selecting a tax saving scheme is no different than selecting any other investment option as one just have to look at the taxability of returns, investor's own tax bracket and return potential of the product. But in the case of tax saving schemes options are very limited. In the case of Manav almost all the investments and allocation has been already worked out and fixed but this year due to some changes in the products scenario he wanted to clear on some of his doubts and restructure his portfolio of tax saving schemes if required.

 

Changes in tax saving schemes in short:

Public Provident fund (PPF), National savings Certificate (NSC), Senior citizen saving scheme (SCSS) are no longer a Stable interest / return product now. All these products' interest rate will be changed every year and depends on the government securities rates. This change has affected more to the most popular tax saving scheme i.e PPF as it has a lock in of 15 years and whatever deposited today will not earn the same rate for the complete tenure as it used to get earlier . Every year the investment will grow with a new rate which may be more or less than the current rate. Whereas NSC and SCSS are one time investments and whatever interest you are offered today will be fixed for the remaining tenure, but the interest rates in this case will also be changed and announced every year and applicable to new investments. A current rate of PPF is 8.80% p.a, NSC is 8.60% p.a and SCSS is 9.30% p.a.

Other change is in the Insurance products. Only those insurance policies will be qualified for deduction u/s 80C, where the insurance cover would be at least 10 times of Premium.

Some new tax saving schemes launched which are meant for some specific categories and type of investors – Rajiv Gandhi equity saving scheme, New pension scheme  and Tax saving on Preventive health check-up.

Others are common products like Equity linked savings scheme, 5 year bank fixed deposit, Pension plans u/s 80CCC, new pension scheme. But do note here that IRDA has announced some changes in the pension products which have made these investments suitable only for retirement planning.

Which tax saving scheme should be opted by whom?

In the case of Manav, he's opened various tax files in his family by properly spreading out the income/savings among members. Now there are all types of tax files which are subjected to different tax rates. So keeping financial planning angle, tax slabs of different members, taxability and rate of returns of product the following composition was suggested.

The young savers and those in 30% tax bracket should not look beyond PPF and ELSS, in other words long term savings only. Both of these tax saving schemes are for long term savings and generate tax free returns. It is perfectly suitable investments to supplement your savings towards your long term goals. One may also put some amount in NPS from retirement planning perspective. When there are financial dependents than do buy adequate life insurance cover through term insurance plan. Never buy an insurance cover through investment linked policy as it will neither suit your investment profile nor provide you with enough insurance cover. In other words avoid ULIPs and traditional plans. Though term insurance is a pure insurance policy with decent difference in the premium and sum assured but still keep in mind the 10 times of insurance condition for tax saving. If direct tax code gets announced this budget '13 then the condition of 10 times of insurance coverage might get increased to 20 times.

Those who are in lowest tax bracket, specially senior citizens in the lowest tax bracket may consider the taxable tax saving schemes like 5 years bank FD as even after tax some of banks FD will give returns more than PPF 8.8% tax free rate. For e.g. the tax saving FD of IDBI bank is offering 9.75% rate to senior citizens. As this rate will remain fix for 5 years and with quarterly compounding this product will be much more rewarding than any other fixed return tax saving scheme instrument.

The Business persons who are concerned on the liquidity front can consider investing in NSCs, as loans are easily available on these instruments.

Tax saving investments is among the most important savings for many and when there's option where you can map your financial planning with tax planning than why not? Manav has understood it and arrange all his investments after having holistic view of his overall financial situation. So should be done by all of you i.e chose tax saving schemes wisely keeping in mind your overall financial planning.

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

Tata Mutual Fund

Being a part of the Tata group, the fund has the backing of a very trusted brand name with strong retail connect. While the current CEO has done an excellent job in leveraging the Tata brand name to AMC's advantage, it is ironic that this was just not capitalised on at the start. Incorporated in 1995, Tata Mutual Fund remained an 'also-ran' fund house for around eight years. Till March 2003, it had a little over Rs 1,000 crore in assets and 19 AMCs were ahead of it. But soon after that the equation changed. It was the fastest growing fund house in 2004 and 2005. During these two years, it aggressively launched six equity funds, two debt funds and one MIP. The fund house as of now stands at No. 8 in terms of asset size. This fund house has a lot to offer by way of choice. And, it also has a number of well performing schemes. Tata Pure Equity, Tata Equity PE and Tata Infrastructure are all good funds. It also has quite a few good debt funds. The funds of Tata AMC are known to...
Read more

UTI Mutual Fund

Even though only a few of UTI’s funds are great performers, this public sector fund house has many advantages that its rivals do not. It has a huge base of retail equity investors and a vast distribution network. As a business, it looks stronger than ever, especially in the aftermath of credit crunch. UTI is, by a large margin, the most profitable fund company in the country. This is not surprising, since managing equity funds is more profitable than debt. Its conservative approach and stable parentage is likely to make it look more attractive to investors in times to come. UTI’s big problem is the dragging performance that many of its equity funds suffer from. In recent times, the management has made a concerted effort to improve performance. However, these moves have coincided with a disastrous phase in the stock markets and that has made it impossible to judge whether the overhaul will eventually be a success. UTI’s top performers are a few index funds, some hybrid funds and its inf...
Read more

Salary planning Article

1. The salary (basic + DA) should be low. The rest should come by way of such allowances on which the employer pays FBT and you don't pay any tax thereon. 2. Interest paid on housing loan is deductible u/s 24 up to Rs 1.5 lakh (Rs 150,000) on self-occupied property and without any limit on a commercial or rented house. 3. The repayment of housing loan from specified sources is also deductible irrespective of whether the house is self-occupied or given on rent within the overall ceiling of Rs 1 lakh of Sec. 80C. 4. Where the accommodation provided to the employee is taken on lease by the employer, the perk value is the actual amount of lease rental or 20 per cent of the salary, whichever is lower. Understandably, if the house belongs to a family member who is at a low or nil tax zone the family benefits. Yes, the maximum benefit accrues when the rent is over 20 per cent of the salary. 5. A chauffeur driven motor car provided by the employer has no perk value. True, the company would...
Read more

8 Investing Strategy

The stock market ‘meltdown’ witnessed since the start of 2005 (notwithstanding the recent marginal recovery) has once again brought to the forefront an inherent weakness existent in our markets. This is the fact that FIIs, indisputably and almost entirely, dominate the Indian stock market sentiments and consequently the market movements. In this article, we make an attempt to list down a few points that would aid an investor in mitigating the risks and curtailing the losses during times of volatility as large investors (read FIIs) enter and exit stocks. Read on Manage greed/fear: This is an important point, which every investor must keep in mind owing to its great influencing ability in equity investment decisions. This point simply means that in a bull run - control the greed factor, which could entice you, the investor, to compromise with your investment principles. By this we mean that while an investor could get lured into investing in penny and small-cap stocks owing to their eye-...
Read more

Debt Funds - Check The Expiry Date

This time we give you an insight into something that most debt fund investors would be unaware of, the Average Portfolio Maturity. As we all know, debt funds invest in bonds and securities. These instruments mature over a certain period of time, which is called maturity. The maturity is the length of time till the principal amount is returned to the security-holder or bond-holder. A debt fund invests in a number of such instruments and each of these instruments would be having different maturity times. Hence, the fund calculates a weighted average maturity, which would give a fair idea of the fund's maturity period. For example, if a fund owns three bonds of 2-year (Rs 30,000), 3-year (Rs 10,000) and 5-year (Rs 20,000) maturities, its weighted average maturity would be 3.17 years. What is the big deal about average maturity then, you may ask. Well, knowing a fund's average maturity is important because it tells you how sensitive a fund is to the change in interest rates. It is ...
Read more
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