Tax Planning Financial planning is very important for any taxpayer. This is the reason that any person should start investing from the beginning of the financial year to get the maximum tax rebate.

Financial planning is very important for any taxpayer. This is the reason that any person should start investing from the beginning of the financial year to get the maximum tax rebate. But it is generally seen that taxpayers keep this thing till the last months of the financial year. As a result, by the end of the year, they make decisions related to investing in a hurry. Many times in this round, people invest in wrong instruments. This saves tax but capital gets misplaced.

It should be noted that the objective of the investment should be to increase the wealth. Tax saving should be an added benefit goal, but it should not be the only objective.

You can adopt the following tax saving plan to save tax and get better returns:

  • There is a benefit of tax exemption on payment of insurance premium, medical insurance, EPF contribution and home loan. You have to consider how much tax you are able to save through this.
  • You deduct these expenses from 1.5 lakh rupees. Now you will be able to better assess how much more money you need to invest.
  • Now you choose such options for investment, so that you will also get the benefit of tax savings and also increase in property.
  • If you want more tax exemption under section 80C, then ELSS funds are the most popular in this case. The reason for this is that it has the lowest lock-in period and investing in it gives you a better average return than other options of 80C.
  • If you have not made any tax saving investment till now, you can invest up to Rs 1,50,000 in ELSS fund and claim tax exemption under section 80C.

Let us briefly do a comparative study of how investing in ELSS funds gives you better returns than other instruments under 80C:

Investment -: return lock-in period

ELSS -: 12-15% * 3 years

National Pension Scheme -: up to 9-10% retirement

PPF -: 7-8% 15 years

National Savings Certificate -: 7-8% 5 years

Bank FD -: 6-7% 5 years

(* Aged rate of return)

This way you can find out how to get the most out of your tax saving limit. You should invest in such ELSS funds with vigilance, wealth creation along with saving tax.

To get maximum returns in any kind of investment and tax planning, the most important is to plan early and then implement it.

Everyone tries hard to earn money, but people think very little about how to spend or invest. We need to spend more time on investing our money. This helps in saving tax as well as achieving manifold increase in rupee.

Better returns on long-term investment

You get more benefit by investing sooner than investing later. Your time gets more time to grow and in this way you are able to create more wealth than the investment made in a hurry in March of next year.

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Every month small investment is more convenient than annual big investment

Compared to investing a large sum of lump sum in January or February, you have the option of investing in tax saving funds every month through SIPs. If you are looking at a tax rebate of Rs 1,50,000 per annum in 80C, then you can start with an investment of Rs 12,000 every month. Investing through SIPs every month gives you a lot of convenience. Through this, there is not much burden on your pocket at one time and your work is also done.

It is important to choose a good ELSS fund with caution

Last-minute decisions are not always very judicious and efficient. You do not have time to research which ELSS fund is right when you take the last minute decision. In such a situation, you miss the opportunity to cash in on the gains made from the investment made soon, as well as there is a possibility of loss due to selecting the wrong fund. Therefore, there is a need to take time to choose the fund and to think very carefully.

(The author heads RankMF in the SAMCO Group. The views published are personal to the author.)

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