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Have you heard of the Income Tax Saving Festival in India?

Well, usually it starts in the last quarter of the financial year (Jan-Mar) when many employees scurry to provide investment proof to save tax outgo.

Sadly, many of our last-minute decisions prove to be poor investments thereafter and hence it’s a good idea to start the tax planning exercise early on. If not already, why not from today? Let’s start…

In India, several financial instruments offer tax-saving benefits under Section 80C and other sections of the Income Tax Act. Here are some of the most famous ones:

PPF, ELSS MF, Sukanya Samriddhi, 5-Year FD, NPS, Insurance-Linked Schemes, Pension Schemes

Refer to the below table to compare these options on parameters such as expected returns, risk, lock-in, taxation on returns, ideal investment horizon and the options we would like you to stay away from.

A simple tax-saving strategy we recommend:

Step I: Choose one of the below investment options and invest the FULL limit of Rs1.5 lakhs

1 – If you have a girl child below 9 years, go for Sukanya Samriddhi Scheme

2 – If that’s not the case and you are comfortable bearing equity market volatility, choose ELSS for higher expected returns in the long term. A monthly SIP of Rs12,500 can be started from the beginning of the financial year

3 – Consider PPF if none of the above works for you

Step II: A yearly allocation of Rs 50,000 in NPS is recommended to take advantage of the additional tax saving limit exclusively allowed under NPS Tier 1 account u/s 80CCD (1B)

Holding your investments in the most tax-appropriate types of accounts is surely going to complement your overall financial planning and asset allocation strategy.

Originally posted on LinkedIn: www.linkedin.com/shivanichopra

Email us at connect@truemindcapital.com or call us at 9999505324.

Truemind Capital is a SEBI Registered Investment Management & Personal Finance Advisory platform. You can write to us at connect@truemindcapital.com or call us on 9999505324.