ELSS or Equity Linked Savings Scheme is also called First Mutual Fund Scheme. Because most investors like to invest in mutual funds only under ELSS.
You can decrease your tax deduction by investing in ELSS, under Section 80C of the Income Tax Section, up to 1.5 lakh rupees annually. It has been observed that many investors start investing in ELSS so that they can save tax and then gradually they start to participate in other mutual funds and equity schemes.
If you are still thinking that ELSS is better for your tax saving or other government schemes, then my today’s article may prove beneficial for you because I am going to discuss this topic today.
If you are not investing in ELSS for tax saving then you should consider it again on your decision. Look for tax saving, many options are available such as public provident fund (PPF), National Saving Certificate (NSC), etc., where you will definitely get assured returns.
Also Read: Tax saving options
But when you compare ELSS with the other tax saving scheme offered by the government, you will find that there is a lock in period of 3 years in ELSS. whereas the other government schemes like PPF and NSC there is at least 5 years of lock in period.
Returns of the money invested in ELSS are very good when compared to any other tax saving scheme proposed by the Government. I would like to say that in order to meet your long-term financial goal government tax saving schemes will fail, while ELSS is better and gives you handsome returns to reach your financial goals.
Yes, it is a different thing that investing in ELSS can be a little risky compared to tax saving schemes operated by other governments because ELSS invests in the stock market, which is risky for a short time. Therefore, to invest in ELSS, you should make your mind for long term investment, for example from 5 to 7 years. So that you will earn a better returns in the ELSS.
It is supposed that ELSS has a risk, but you get a reward for taking risk. For instance, those who invest in ELSS in the last few years have been given tax free returns of about 13.52 percent in three years and 17.29 percent in 5 years and 9.83 percent in ten years. Which is much more than other government schemes.
Also Read: How to Invest in Mutual Fund
If you are having your interest in investing in ELSS then here are some of the following schemes which have given good returns in the last few years.
- L&T Tax Advantage Fund
- Aditya Birla Sun Life Tax Relief 96
- DSP Black Rock Tax Saver Fund
If you want to invest in these ELSS Schemes, then I will suggest you that you should invest under Systematic Investment Plan (SIP) and invest for a minimum period of 5 years or else the best option will be that you should Invest in ELSS for the long term financial goal. So that returns will also be a better amount and risk will be significantly reduced. Last but not the the least invest in market after reading and understanding all the risk involved.
Save Tax: Everyone earn money by working hard, but when this money is deducted from your salaries at the end of the year in the form of tax. This is the most painful moment. Everyone wants to reduce their taxes at least, but taxpayers often do not have enough information about other options. Apart from the Income Tax Act 80C, there are many other income tax laws which get tax exemption in many ways. Today I am going to tell you about some special options.
1. Salary Reconstructing
It is not always possible to redesign your salaries again. But if your company permits this, and you have good relationships with your HR, then there may be less tax on some of your salaries.
Take a Food Coupon instead of lunch allowance, it exempts tax of up to Rs 60,000. Medical allowances, Transport allowances, Education allowance, Uniform allowance (if any) and telephone expenses make remain in the salaries and show the right bill of these so that they can get the tax rebate. Not only this, to avoid paying more taxes, use the company’s car instead of your car.
2. Use Section 80C
Use section 80C as much as you can, because, under this, you will get a tax deduction up to a maximum of Rs.1,00,000. Invest in these options to make good use of this section.
- Public provident fund
- Life insurance premium
- National Savings Certificate
- Equity Linked Savings Scheme (ELSS)
- Fixed Deposit in Banks and Post Office for 5 years
- Tuition fees for children’s education
3. Alternate option other than 80C
If your amount is less than one lakh rupees then there are more options than Section 80C.
1. Section 80D-15,000 for medical insurance, for husband or wife and dependent children, and Rs 20,000 for medical insurance for parents over 65 years of age.
2. For the investment in section 80 CCF- Notified infrastructure bond, a deduction of Rs. 20,000 along with 1 lakh under Section 80C
3. Section 80G- Donation in specific funds and Charitable Institutions.
4. House Rent
Are you giving your house rent yourself and you are not getting any HRA from the company? So take these options, which you can avail under Section 80 GG.
1. 25% of the total income
2. or, Rs 2,000 per month
3. or, Payment of more than 10% of the total amount of rent.
4. If you live with your spouse and a minor child and the house you live in is your own house and from there you do all the work of your office, there will be no deduction from any of your salaries.
5. If HRA ( House Rent Allowance) makes part of your salary, then you will get a minimum discount in the three below.
# The current HRA that you will get from your boss.
# The current house rent you will fill, includes 10% reduction in salary (basic + dearness allowance, if any)
# 50% deduction from your salary (for metro) and 40% deduction of salary (for non-metro)
5. Save Tax From Home Loans
Use your home loan properly so that you can save more tax. The main principle of your loan comes under 80C, which is a reduction of 1, 00,000. Not only that, deduction of interest of 1, 50,000 under Section 24 is also their.
Whether you are a salaried person or businessman tax is a big problem that everybody tries to save.
So today I am going to unveil some facts how to invest your money in various schemes for saving tax in India.
I am going to keep some such schemes in front of you which can prove to be very helpful in saving your tax.
In India Life Insurance is one of the most important and oldest of all investment methods. Buying life insurance for your tax savings can prove to be a very good way. If you are thinking about life insurance then you should also know that life insurances are of many types such as money back plans, ULIP plans and term insurance plans.
You get tax benefit on the amount of money you invest in life insurance under section 80 C of income tax. Also, If you have taken money back plan then the return provided is also tax free.
Public Provident Fund (PPF)
This can be a very golden way for those who want to avoid tax deduction. Investing under this scheme you get tax benefit under section 80C and you also get the interest of that amount too. Before investing in this plan, you should know that this plan required very long-term period that is fifteen years. In which the liquidity is also not very easy.
Equity Linked Savings Scheme (ELSS Fund)
These are types of mutual funds which are used mostly for tax saving. But you should remember that such investments sometimes have a lock in period of three years.
And don’t keep any doubt in your mind. If you are thinking that you will invest in SIP monthly and withdraw it after three years then you are wrong. The SIP of each month is treated as a new investment and you can only withdraw it after three years of its completion. Under this fund, you can also save your tax under Section 80C
Keeping an eye on such investment, it would not be wrong to say that after three years you will come with a positive return.
Before investing in this type of fund, you should consider your time limit above seven years or you can see the condition of a negative earning.
Employee Provident Fund (EPF)
This is also a method of indirect savings scheme under which 12% salaries of the employees are deducted and paid into this scheme. Apart from 12% your employer also contributes 3.67% and deposits it in your PF and rest of 8.33% is deposited to your Employee Pension Scheme.
Taxes under the Income Tax act 80C are applicable on the amount provided in this fund.
Earlier, the limit for this fund was Rs.6500 , which has now been increased to Rs.15000, which means that you can save up to Rs.15,000/- every month in this fund. This scheme saves your tax and save money too.
Senior Citizen Savings Scheme
This scheme does not apply to everyone as named. it only exists for senior citizens. Under this scheme, any senior citizen can invest up to 15 lakh rupees. There is no tax under Section 80c of the Income Tax section above the amount invested in this scheme.
But before depositing any amount in this scheme you should know that, whatever interest you get from it, it will be taxable.
National Savings Certificate or Bank FD
This is also a very old and popular way of saving in India, under which you can fix your money amount for five years or ten years and you can avail of the interest you get on it.
Yes, but you have to remember that you will definitely be a tax imposed on interest earned here.
All of the above options have some positive points and there are some negative points. Now you have to decide what you want to do, as I would like to tell you that you should not just think about tax saving as well as your future financial needs. Also, if the tax-saving schemes are helping in fulfilment of your future financial needs, then you are in the right direction otherwise you should find another option.
Income Tax Rates for FY 2017-2018
Income Tax rates depends on your total yearly income. If your yearly income exceeds these slabs you need to pay tax on your income depending on your income. Even, if you are earning less than taxable income, it is advisable to file your tax returns.
Income tax exemption limit for FY 2017-18 is up to Rs. 2,50,000 for individual & HUF
Income Tax Slab Senior Citizens (60-80 Years Old Men & Women)
Income Tax Slab Senior Citizens Above 80 Years Old For Men & Women
Above Income tax rates are applicable for Individuals and HUFs.
Find out the Tax saving Insurance Plans
All efforts are made to keep the content as accurate as possible. We take no responsibly of any errors. You are advised to consult your Chartered accountant for any query on income tax.
Important Income tax benefits available under various plans of life insurance:
1) Deduction allowable from income for payment of Life Insurance Premium (Sec. 80C).
(a) Life Insurance premium paid in order to effect or to keep in force an insurance on the life of the assessee or on the life of the spouse or any child of assessee & in the case of HUF, premium paid on the life of any member thereof, deduction allowed upto 20% of capital sum assured during any financial year.
(b) Contribution to deferred annuity Plans in order to effect or to keep in force a contract for deferred annuity, on his own life or the life of his spouse or any child of such individual, provided such contract does not contain a provision to exercise an option by the insured to receive a cash payment in lieu of the payment of annuity is eligible for education.
(c) Contribution to Pension/Annuity Plans – New Jeevan Dhara-I & Jeevan Akshaya – VI
2) Jeevan Nidhi Plan & New Jeevan Suraksha – I Plan (U/s. 80CCC)
A deduction to an individual for any amount paid or deposited by him from his taxable income in the above annuity plans for receiving pension (from the fund set up by LIC under the Pension Scheme) is allowed.
NOTE: The premium can be paid upto Rs.1,00,000/– to avail deduction u/s.80C, 80CCC & 80CCD (80CCD- Deduction in respect of contribution to pension scheme of Central Government.).
However, there is no sectoral cap i.e. the limit of Rs.1,00,000/- can be exhausted by paying premium under any of the said sections.
3) Investment under long-term infrastructure bonds notified by the Central Government. (Sec. 80CCF)
A deduction up to Rs.20,000/- is available to individuals and HUF for amount paid or deposited as subscription to long-term infrastructure bonds notified by the Central Government. This is in addition to Rs.1 lakh deduction available under section 80C.
4) Deduction under section 80D
a) Deduction allowable upto Rs.15,000/- if an amount is paid to keep in force an insurance on health of assessee or his family (i.e. Spouse & children)
b) Additional deduction upto Rs. 15,000/- if an amount is paid to keep in force an insurance on health of parents
c) In case of HUF, deduction allowable upto Rs.15,000/- if an amount is paid to force an insurance on health of any member of that HUF
Note: If the sum specified in (a) or (b) or(c) is paid to effect or keep in force an insurance on health of any person specified therein who is a senior citizen,then the deduction available will be upto Rs.2,000/- provided that such insurance is in accordance with the scheme framed by
a) the General Insurance Corporation of India as approved by the Central Government in this behalf or;
b) Any other insure and approved by the Insurance Regulatory and Development authority.
5) Jeevan Aadhar Plan (Sec.80DD) :
Deduction from total income upto Rs.50000/- allowable on amount deposited with LIC of India under Jeevan Aadhar Plan for maintenance of a handicapped dependent (Rs.1,00,000/-where handicapped dependent is suffering from severe disability)
6) Exemption in respect of commutation of pension under Jeevan Suraksha & jeevan Nidhi Plans:
Uder Section 10(10A) (iii) of the Income-tax Act, any payment received by way of commutations of pension out of the Jeevn Suraksha & Jeevan Nidhi Annuity plans is exempt from tax under clause (23AAB).
7) Income tax exemption on Maturity/Death Claims proceeds under Section 10(10D)
Under the Previous of section 10 (10D) of the Income-tax Act, 1961, Maturity/Death claims proceeds of life insurance policy, including the sum allocated by way of bonus on such policy (other than amount to be refunded under jeevan Aadhar Insurance Plan in case of handicapped dependent predeceases the individual or amount received under Keyman Insurance Plan) is exempted from income-tax. However any sum (not including the premium paid by the assessee) received under an insurance policy issued on or after the 1st day of April, 2003 in respect of which the premium payable for any of the years during the term of the policy exceeds 20% of the actual capital sum assured will no longer be exempted under this section.