Veez

Tax Planning & Mutual Funds

Whether you are a salaried person or a businessman, every year you worry about your Tax Planning. But is your planning pattern also the same each year? Do you start worrying about tax saving instruments in the last 3 months or when you’re HR starts following up with you for proof of savings? Get active and plan right away. The Income Tax Act provides for many avenues under section 80C which help you pick your choicest route to save taxes. It basically offers a list of expenditures & investments which allow you a deduction from Taxable Income. Effectively, you can save upto Rs 46,350 worth of tax through these avenues. While the list is long and includes everything from investments like PPF (Public Provident Fund), EPF (Employee Provident Fund) & 5Yr Bank FD to expenditures like Interest on Home Loan, Life Insurance Premium etc., not all may be suitable for you. While some of them may offer very good tax benefits, they may have either very low returns or a long holding period. So which option is right for you? The answer is ELSS (Equity Linked Savings Scheme).

What is ELSS?

ELSS are mutual fund schemes that are designed to offer you good returns, lowest lock in amongst all 80C... Read More

But why is it better?

All options under section 80C can be compared on broadly on basis of Liquidity (or lock in period)... Read More

When should one invest in ELSS?

Most investors wait for the last quarter (JFM) to start planning their tax savings or tax investments. Unlike ... Read More

Name of Instrument	Tax Benefits/ Limit	Features	Minimum Holding period	Risk Level	Tax efficiency of Returns
Equity-Linked Saving Scheme (ELSS) - Mutual Fund	EET status	Most aggressive returns in all – historically have delivered over 14% p.a. over 3-5 years period	Lowest holding period – 3 years	Moderate to High	Capital Gains carry LTCG tax benefit
Public Provident Fund (PPF)	EEE status	8.5% p.a. fixed	Lock in of 5 Yrs to 15 Yrs	Very safe	Tax Free
National Saving Certificates (NSC)	ETE status	About 8.3% p.a.	5 years lock-in minimum	Very safe	Interest is taxable annually
Tax saving FD	ETE status	Expect Interest rate ~7.5-8% p.a.	5 years lock-in minimum	Safe	Interest is taxable annually
LIC (ULIPs)	EEE status	Expect ULIPs to return ~8-10% & some Life Insurance cover	Minimum 5 years holding period	Moderate to High	Tax Free but highest expense ratio