Why ELSS are best Tax Saving option?

ELSS stands for Equity Linked Saving Schemes. These are diversified Mutual Funds with lock-in period for at least 3 years. It comes under IT section 80(C), that means it give you the option to invest money in equity mutual funds with tax deduction in income tax same as other tax saving options.

In India, mostly people consider limited options for income tax saving as LIC policies, National Saving Scheme and Public Provident Fund. But there are few more options to go for like, ULIP (Unit Linked Insurance Plans), 5 years Fixed Deposit and ELSS (Equity Linked Saving Schemes).

All options apart from ULIP and ELSS, have fixed returns at the time of maturity. That means you will already know how much you are going to get at the time of maturity. Which makes them low return option.

If we talk about ULIP (Unit Linked Insurance Plan), I personally feel ULIPs can give you good returns only if you will withdraw money after staying for long term. When I say long term for ULIP, it should be more than 10 years at least. But at young age, we do not like to wait for such a long time, as we may have sort term financial goals like buying a car or a house.

If you will go for fixed returns option, you will hardly be able to earn returns. That means you will be able to save some money in tax but not be able to earn much from investment. Also most of the fixed return tax saving options comes with at least 5 years of lock-in period.

If you will go for ULIP, you will be able to earn good returns but you will not be able to use your money for short term goals even if you need it. You need to pay the amount at least for minimum committed period and stay invested for a long time.

So the best option to go for tax saving at age 20-40 years is ELSS. There are few benefits listed below for ELSS funds.

1. You will get returns, as good as equity mutual funds. Some times better than that. (Comparatively, the funds with lock-in period perform better than open funds)

2. The money will be locked only for 3 years from date of investment.

3. It gives you the option to invest with SIP method (Systematic Investment Plan – Monthly, Weekly).

4. Option to stop your SIP anytime. (No minimum commitment required)

Most of the Mutual Funds houses have their tax saving funds. To choose the best ELSS fund, contact your financial adviser.

Stay healthy and keep investing.

Disclaimers:

The views expressed in the blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company.

Insurance is the subject matter of solicitation.

Mutual Funds investments are subject to market risks. Please read the offer documents carefully before investing.

For all your investment needs, call WealthMaster.in Team @ +91-9810582989 or email at wealthmaster.in@gmail.com

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Do You Need a Financial Advisor?

When we plan our finances or try to create an investment portfolio, we ask this question from ourselves. Do I need a financial advisor or I can do it on my own?

Somewhere in our mind we will always have this confusion whether or not we should trust someone else for our money.

I will give answer your query with a very simple example.

One of my friends recently planned to do a fixed deposit for around sixty thousand rupees. When he visited the bank, the bank executives explained him about a different plan which can give him better returns. They were very convincing and we trust bank more than anyone else when it comes to financial decisions. Even when he got the plan documents, he was unable to identify what plan he bought as papers were not easy to understand. Finally, when he consulted us, the plan turned out to be a ULIP. A unit linked insurance plan. Because he contacted us after 2 months of receiving the documents, there was no option to return the plan. Now he has to pay sixty thousand as premium every year for at least 10 years to get good returns from ULIP.

This is a true example and let’s see what issues he will be facing due to this.

•     Fixed deposit was his onetime plan but now he has to pay it every year.
•        He already has good insurance cover with term plan so insurance was not his need.
•        He cannot withdraw the money in between even if he need it as it will be a loss.
•        He is only 27 in his age and there are better investment options available but he can’t take          benefits.

What should have been done?

He should have consulted a financial advisor before even going for fixed deposit.

It sounds strange because FD is the safest and easiest option we think for saving money. But we need to change the way we think about savings and investment.

Why it is important to consult?

There are many financial instruments available in market. All are good but may not be suitable for everybody. The product requirement may vary according to your age, income, marital status, number of dependents, short term or long term goals.

Consulting a financial advisor is like consulting a doctor for financial health. You know what medicine you need to take for fever but still you need to consult doctor as fever may not be normal and may cause some serious issues.

How to choose a financial advisor?

• You can talk to different advisors and then decide.
•  Advisor should not be forcing you to go for one type of product only he should have an umbrella to offer.
•  He should be guiding you according to your financial goals and not according to your financial status.
•   Do not only trust on big brands but choose experience.
•   Ask questions to understand the reason why he advised you something.

I understand it is not easy to trust someone when it comes to your money matter, but you should trust the expert advice. You can be good with what you do daily and they are good at what they do daily.

Disclaimer: The views expressed in the blog are those of the authors and do not necessarily reflect the official policy or position of any other agency, organization, employer or company.

Insurance is the subject matter of solicitation. Mutual Funds investments are subject to market risks. Please read the offer documents carefully before investing.

For all your financial needs, call WealthMaster.in Team: +91-9810582989.

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Tax Savings Investments - Small Savings

Tax Planning is often considered to be an annual activity, where at the end of a financial year, you plan your taxes and make investments to avail tax saving benefits. But, this is not how it should be done; Tax Planning is an ongoing process, which covers varied aspects especially related to different Investment options, which are not only an ideal way to avail Tax benefits but are earn profits for the same. Therefore, one should look at Taxation Planning not only as a way to reduce your tax liability but also as a means that could significantly contribute to your financial growth and prosperity.

Strategic Tax Planning 

The changing norms and provisions related to taxation process be it personal, corporate or any other type, has made Taxation of the most cumbersome topics of discussion. However, irrespective of the fact that you like it or not, but you can't ignore it. There are number of tools and factors, using which you can efficiently plan and strategize your tax saving investments to earn you maximum benefits.

Best Tax Planning Tools

There are no two doubts about the fact that Public Provident Fund remains the unbeaten leader in the tax saving options. However, there has been gradual development of other tools which opens new avenues of financial benefits to the investor, diversifying the investment options along with reducing your tax liability. Some of the prominent ones are listed below:

Public Provident Fund

PPF is an all-time favorite, because of the investment undertaken in this is eligible for deduction under the 1,00,000 limit of Section 80C, as well as on maturity, you pay absolutely no tax. The amount invested in this scheme is returned without any interest.

· Minimum & Maximum Investment range 

* 500 pa and 70,000 pa respectively 

· Yield rate: 

* 8% pa 

· Liquidity 

* Investor can make withdrawal in the seventh financial year

Insurance

One can avail tax rebates under Income Tax Act, by investing in life insurance saving schemes for government owned Life Insurance Corporation of India and even other private insurance companies like Bajaj Allianz, Birla Sun Life Insurance, HDFC Life Insurance, ICICI Prudential and more.

Post Office Deposits

Post offices in India also offer you varied savings schemes and options for short term ranging from 1 to 5 year time frame. What makes these investment schemes even more appealing is their eligibility for tax benefits under Section 80C of IT Act. Some of the common post office based tax benefits tools are listed below:

· Post Office Time Deposits 

· Post Office Recurring Deposits 

· Post Office Monthly Income Scheme [Post office MIS] 

· National Savings Certificates [NSC] 

· National Savings Scheme [NSS] 

· Kisan Vikas Patra - [KVP] 

· Public Provident Funds [PPF]

Equity Linked Savings Scheme (ELSS)

ELSS is a relatively new tool, which is emerged as one of the most lucrative tax saving tool recently. Although there is an element of risk involved in these, ELSS investments are popular not only because of its effectiveness in controlling tax liability but also for tax free assured returns which it offers.

Other Alternatives

Apart from the above mentioned tools, some of the other not so prominent tax saving investment options eligible to earn tax rebates under Income Tax Act, are listed below:

· Tuition Fees including admission fees or college fees paid for Full-time education of any two children of the assesse (Any Development fees or donation or payment of similar nature shall not be eligible for deduction). 

· Life insurance premium payments 

· Contributions to Employees Provident Fund (EPF) / GPF 

· Public Provident Fund (maximum ` 70,000 in a year) 

· National Saving Certificates including accrued interest. [NSC] 

· Unit Linked Insurance Plan (ULIP) 

· Senior Citizens Savings Scheme (SCSS) 

· Equity Linked Savings Scheme (ELSS) 

· National Pension Scheme (NPS) 

· Infrastructure Bonds issued by Institutions/ Banks such as IDBI, ICICI, REC, PFC etc. 

· Interest accrued in respect of NSC VIII issue 

· 5-Year fixed deposits with banks and Post Office 

· Repayment of Housing Loan (Principal)

Therefore, managing tax and planning is not a cumber some exercise, if you know all these basic tax saving tools and their respective advantages. In fact the same can earn you significant gains if you are willing to invest little time in the same.

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