Yes, it’s time to do the Tax planning for the current Fiscal- if not done already!
Normally the Tax planning exercise though tedious and we always procrastinate, ideally should be undertaken in the beginning of the fiscal year i.e. APRIL itself. Nonetheless better late than never goes the adage.
The Individual Tax planning needs a clear understanding of not only the tax structure and the resultant tax liability per se but also the avenues for safe, secured and gainful investments keeping in mind the ROI as well. While investing one has to keep in mind the inflation, present cash flows, the future cash flows applying the Present Value (PV) method and Discounted Cash Flow (DCF) mode. The investments need to be done with ease without any borrowing for that. Investments purely from the point of view of Tax avoidance would not suffice the purpose. Saving tax should be incidental but the safety, liquidity and ROI are primary factors.
As the time for investments related to tax savings draws closer, one has to evaluate the the options of investment in Debt and Equity to meet various goals. For Tax savings PPF, PF, NPS, 5 Year bank/P/O deposits, Life Ins. premium, NSC, ULIP, etc become handy to avail Rs 1.5 L exemption under 80 C of the Income Tax Act.
While most of the Investments are under long term in nature, the equity related investments are for 5 years and more, debt related investments could still be longer. So our future cash flows, goals and commitments, time horizon, return factored with Inflation, tax benefits are the real areas of analysis.
ELSS is an ideal investment with a lock in period of 3 Years (least) and good for tax saving. In fact data proves that this a sought after investment as we find an amount of Rs.98,871 cr has flown in under this category (AUM). There is no cap under the scheme and the Fund manager takes care of the investment in diversified portfolios. However the returns are taxable under LT CG @ 10 %..
ULIPs are long term vehicles for Life cover and investments. Part of the premium goes to Insurance and the rest to equity and debt funds. Like MFs, value of the fund can be tracked NAV. Here one can get tax benefit under 80 C and also on maturity under 10 (10D).
DEBT FUND INVESTMENT OPTIONS:
For the risk averse investors, PPF is the best option with Rs 1.%0 lakh cap with 15 years term and can be extended for 5 years more and @ 7.9 % p.a. Similarly Post office FDs, Senior Citizens FD plans, LIC’s Pension Plans, banks’ FD plans for 5 years are some of the options to save taxes.
So be prudent to invest smartly and enjoy the returns and tax exemptions and plan right now.
For all your investment needs, Contact Goodwill- your friendly Investing consultant.