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Tuesday, June 23, 2020

Want to invest in mutual funds to save tax? Select, handle the ELSS but be careful

ELSS_Mutual_Fund
ELSS_Mutual_Fund

In this scheme of mutual funds, investment is tax-exempt under Section 80 of the Income Tax Act.


For tax saving, people who want to invest in mutual funds are advised to invest in equity linked saving scheme ie ELSS. In this scheme of mutual funds, investment is tax-exempt under Section 80 of the Income Tax Act. Investors can avail tax rebate by investing Rs 1.5 lakh in these schemes.

 

Investment instruments in which tax can be exempted from investment under section 80 are all government backed investment schemes. But the returns are quite low. Therefore, if you want to take advantage of tax rebate with higher returns, then invest in Equity Linked Savings Scheme ie ELSS.

 

Three year lock in period in ELSS

 

Tax savings mutual funds have a mandatory lock-in period of three years. But this does not mean that you invest for three years. Since it invests in equity only, so invest in ELSS for five to seven years for better returns.

 

Yes, do not invest in ELSS just because it can give better returns in the long term. If you can afford to invest in equity, then you can invest in ELSS. But it is also true that among the options available under section 80C, the lock-in period of three years is in ELSS. That's why many mutual fund advisors consider them the best option for venturing into the world of equity mutual funds. But in the last 10 years, the ELSS mutual fund category has given a return of about 8.46 percent.

 

Therefore, while investing in ELSS, these facts must be kept in mind. ELSS can be helpful in tax savings but due to equity class savings, its risks increase. So, invest in ELSS but also know its risks.

 

👉Take care of tax at the time of investment; more than 1 lakh tax will be saved from these 4 ways 

Taxpayers use section 80C, 80D, 80CCD (1B) and 24 (b) of the highest income tax to save tax.

 

As soon as the dates for filing tax returns are announced, the worry of saving tax starts. Taxpayers use section 80C, 80D, 80CCD (1B) and 24 (b) of the highest income tax to save tax. However, under every section, the government has fixed the investment limit. But by investing under these sections, you can save tax up to more than one lakh rupees.

 

Tax savings under 80C

 

The most popular means of saving tax are investments made under section 80C of income tax. To get discounts under this, you can invest up to one and a half lakhs in some instruments. Under this, premiums of life insurance, equity linked saving scheme i.e. ELSS, public provident fund i.e. PPF, National Savings Certificate, five year notified tax-saving bank deposit, post office five year deposit scheme, senior citizen saving scheme, Sukanya Samriddhi, Investments come in EPF etc. But it should be remembered that the investment limit in all these should not exceed one and a half lakh rupees.

 

Tax savings under 80CCE

 

The investment limit under 80CCE, under 80C, 80CCC (Pension Plans of Insurance Companies) and 80CCD (1) (Applicable in investments in NPS), cannot exceed one and a half lakhs. Actually investment under 80C is not just your tax. It not only reduces the burden but also helps in investing for your long term financial goals.

 

Under 80D, income tax is deducted on investments made in health insurance premiums. Under this, deduction up to a maximum of Rs 25,000 is available. Similarly, 24 (B) gives you tax rebate based on the EMI given under the item of home loan. Investors should prioritize investing on such instruments for their long-term financial goals, so that they can also get tax relief.

 

👉What is Form 15G and 15H? They can take support to avoid tax through these forms; a person tells that his income does not come under the tax net. Therefore tax should not be taken from him.

 

New Delhi: By filling Form 15G and 15H, you can avoid TDS deduction on income. Through these forms, a person tells that his income does not come under the tax net, so tax should not be taken from him. 15H is for senior citizens of 60 years and above, while 15G can be filled by others. Some banks provide the facility to fill these forms through their website.

 

These forms are valid for one year only

 

Form 15G and 15H are valid for the same year, so these forms should be filled at the beginning of every financial year. With this, banks will not deduct TDS in your interest income. This time due to coronavirus infection, taxpayers would not be able to fill these forms on April 1, 2020, so the last date for filling them has now been extended to June 30, 2020. However, these forms can be submitted by the first week of July.

 

They can fill in Form 15 G

-Person or Hindu undivided family or any trust but not company or firm.

- Any Indian resident.

-Whose age is below 60 years

-Tax calculation on total income should be zero.

- Total income from interest is less than 2.5 lakhs during the financial year

 

They can fill in Form 15H

 

-A person and Indian resident.

-You are a senior citizen and the year you fill the form, that year you are turning 60 years old.

- Tax calculation on your income is zero.

 

These forms do not have to be filled with the Income Tax Department. Submit them to your tax deductor (e.g. your company or employer). At the same time, prepare these forms and submit them to the Income Tax Department. If your income is more than 2.5 lakh rupees then do not deliberately submit these forms. Since the PAN number has to be written in these forms, then action can be taken if you come under the taxable income.


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