March 31 is round the corner; here are some quick investments for I-T
Each scheme has a different lock-in profile, returns profile and taxability profile; some are one-time investments while others are recurring commitments
It is the last week of March and perhaps many of us are scouting for both time and money to complete our tax planning investments. Exactly the wrong way to go about it.
Tax saved is money earned. Thanks to the benevolence of our income tax laws, we can invest money, earn returns on it and also save income tax payable on the investment. Grab it as long as it exists.
Under Sec 80C of the Income Tax Act, you can invest up to Rs 1,50,000 in prescribed investments and decrease your tax pay out. This Rs 1,50,000 is deducted from your taxable income so that you save as much Rs 45,000 in your tax liability, presuming you are in the 30% tax bracket.
While investing in a post office scheme would require a quick trip to the post office, the rest can be done online, provided you have sufficient funds.
As we can see, each scheme has a different lock-in profile, returns profile and taxability profile. Some are one-time investments while others are recurring commitments.
In terms of shortest lock-in and potential for better returns, ELSS seems to score well. If you are willing to assume the risk associated with equity markets, this is a sure shot avenue for wealth creation. The lock-in period is irrelevant because you can stay invested in this for eternity. What’s more, you can invest any amount in this scheme. The withdrawals are taxed at a concessional rate of 10%. After the lock-in period, you can withdraw as much as you need whenever you need.
Some of the popular ELSS schemes today in the market are Mirae Asset Tax Saver, Axis Long Term Equity Fund and SBI Long Term Equity Fund with a track record of performance over a number of years.
It makes sense to make this tax planning savings a habit and link it to some long-term financial goals like children’s future or one’s own retirement. Tax savings is only an excuse; you need to save and invest even otherwise.
The bottomline is: there are quick-fix solutions, but don’t wait till March-end to save. You will run short of both time and money. Do it the first thing in the month of April itself or at least on a regular monthly basis. Go for an SIP in ELSS schemes.
(The writer is a personal finance expert and CEO of Shilpa Associates, Bengaluru).