When others Rs 60,000 in tax, you can save more!

As published in The Telegraph on 11 January, 2017

Start planning your next year’s Taxes and stay worry-free. Here’s how you do it:

Basics of tax saving:

Did you know that if you invest Rs. 1.5 lakh in certain options like special tax-saving Mutual Funds, the amount gets deducted from your income? So, you pay up to Rs. 45,000 less as Income Tax.

What about the remaining Rs. 15,000?

If you invest Rs. 50,000 in a National Pension Scheme (NPS) over and above your ELSS, you can save an additional Rs. 15,000 in Income Tax. But you have to invest the initial Rs. 1.5 lakh in ELSS-like options.

Can I save more than Rs. 60,000?

Yes. But you have to be smart about it. If you start today for 2017’s tax, then you can research more options.

Only then can you find out that Equity Linked Savings Scheme (ELSS) gives about 20% returns every year on average. This is much higher than other tax-saving options.

So how does that save money?

Think about it — a 9% return from say a Public Provident Fund (PPF) means you earn Rs. 13,500/year. Whereas a 20% return on the ELSS earns you Rs. 30,000! So you save money by earning more.

But why should I start early?

What’s better — Investing Rs. 12,500 every month or Rs. 1.5 lakh in a single month? The former takes time. It also offers you the advantage of rupee-cost averaging.

What’s rupee-cost averaging?

It’s simple — every month, the market prices fluctuate. So, when you invest every month, your basic investment value is an average of all the prices. This is better than investing at a time when the market is high. So you end up getting higher returns.

But what about the risks?

That’s the best part — the risk is much lower than a regular Equity Mutual Fund. This is because of its 3-year lock-in period. No one can sell it off before three years. This makes the ELSS Fund a lot more stable.

Any other benefits?

- Think about it — by paying Rs. 12,500 every month, you even have the bandwidth to buy the phone right away on EMI. Can you do that when you spend Rs. 1.5 lakh in a month? Not really.

- Plus, your ELSS investments can help you build wealth over the long-term. It can even double up as your retirement fund after earning returns for decades.

- Oh and, when you invest in ELSS, you will not be taxed for any of your profits or dividends. However, when you invest in a tax-saving Fixed Deposit, your interest payments will be taxed.

Key Takeaways:

1) Be smart enough by investing Rs. 12,500 every month instead of a lumpsum amount.

2) You can save more money by investing in high return-generating Tax-Saving Mutual Funds.

3) ELSS Funds often give around 20% returns — double that of regular tax-saving options.

For more details about seeking financial advice, head to our website:www.beswatantra.com

For more details, visit www.beswatantra.com or follow us on Twitter #swatantra. You can also Email queries or suggestions:info@beswatantra.com Please mention ‘Swatantra on Medium’ in the subject line.

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