JAN – FEB – MARCH THE SEASON OF WORRIES FOR TAX PLANNING… Do I invest only to save tax? Where do I invest to invest to I do not have save tax? How much enough tax I can money right save? now to invest.
Invest under sec. 80 C of IT Act to save tax f Save up to Rs. 46,350/‐ P Per annum by investing in under Section b d S upto Rs. 46350/‐ 80C of the Income Tax Act, 1961 Illustr ation on Inve stme nts ac r oss T ax Slab T T ax be ne fit unde r Se c 80C of IT b fit d S 80C f IT A Ac t, 1961 t 1961 Not Not Not Availe d Availe d Availe d Availe d Availe d Availe d (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) (Rs.) Gr oss Inc ome 5,00,000 5,00,000 10,00,000 10,00,000 15,00,000 15,00,000 Inve stme nt in E L SS unde r - 1,50,000 - 1,50,000 - 1,50,000 Se c tion 80C Ne t T axable Inc ome 5,00,000 3,50,000 10,00,000 8,50,000 15,00,000 13,50,000 25,000 10,000 1,25,000 95,000 2,75,000 2,30,000 Gr oss T ax L iability L e ss: Re bate if Inc ome is up 2,000 2,000 - - - - to 5,00,000 Inc ome T ax R ate 10% 10% 20% 20% 30% 30% Applic able Ne t T ax L iability 23 000 23,000 8,000 8 000 1 25 000 1,25,000 95 000 95,000 2 75 000 2,75,000 2 30 000 2,30,000 Ne t T ax L iability 690 240 3,750 2,850 8,250 6,900 E duc ation Ce ss at 3% T otal T ax L iability 23,690 8,240 1,28,750 97,850 2,83,250 2,36,900 15,450 30,900 46,350 T ax Save d Nil 15,450 Nil 30,900 Nil 46,350 I nc o me e stima te s fo r a n individual le ss tha n 60 ye a rs o f a g e . T he a b o ve simula tio n is fo r illustra tio n purpo se o nly. As pe r the pre se nt ta x la ws, e lig ible inve sto rs (individual/ HUF) a re e ntitle d to de duc tio n fro m the ir g ro ss to tal inc o me , o f the a mo unt inve ste d in e q uity linke d sa ving sc he me (E L SS) upto `1,50,000/ - (alo ng with o the r pre sc rib e d inve stme nts) unde r Se c tio n 80C o f the I nc o me T a x Ac t, 1961. T a x b e ne fits a re sub je c t to the pro visio ns o f the I nc o me T a x Ac t, 1961 a nd a re sub je c t to a me ndme nts, fro m time to time .
You can WHAT YOU CAN save tax ACHIEVE BY INVESTING and… TO SAVE TAX? Hybr id E quity Othe r s F ixe d Inc ome PPF/EPF/VPF/NSC Tax Saving Bank FDs, Unit Linked Insurance Premiums, Post Office Time Equity Linked Savings Insurance Plan Pension Premiums, Deposits, Senior Schemes (ELSS) (ULIP) National Pension Citizen Savings g Scheme etc. Scheme We alth Cr e ation Pr ote c tion Inc ome Ge ne r ation Pr ote c tion CHOOSE THE CORRECT OPTION? CHOOSE THE CORRECT OPTION? * As pe r the pre va iling ta x la ws fo r F ina nc ial ye a r 2016, e lig ible inve sto rs (I ndividua l/ Hindu Undivide d fa mily(HUF)) a re e ntitle d to de duc tio n fro m the ir g ro ss to ta l inc o me , o f the a mo unt inve ste d in e q uity linke d sa ving sc he me (E L SS) upto 1,50,000/ - (a lo ng with o the r pre sc rib e d inve stme nts) unde r Se c tio n 80C o f the I nc o me T a x Ac t, 1961. T a x b e ne fits a re sub je c t to the pro visio ns o f the I nc o me T a x Ac t, 1961 a nd a re sub je c t to a me ndme nts, fro m time to time . PPF = Pub lic pro vide nt fund, E PF = E mplo ye e pro vide nt F und, VPF = Vo lunta ry Pro vide nt F und,NSC= Na tio na l sa ving c e rtific a te , F Ds= F ixe d De po sits
WHAT MAKES ELSS RIGHT TOOL FOR YOU ?? T ax Be ne fits unde r Se c tion 80C Only 3 Ye ar O l 3 Y s of L f L oc k in pe r k i i d iod Be ne fit fr om L ong T e r m Capital Gains High r e tur n Pote ntial* Syste matic Inve stme nt Plan(SIP) F ac ility Sc ope for tax fr e e divide nd** * Sub je c t to ma rke t risk. **T a x fre e divide nds a s pe r the pre va iling ta x la ws, pursua nt to pa yme nt o f divide nd, the NAV o f the re spe c tive o ptio ns o f the Sc he me s wo uld fa ll to the e xte nt o f pa yo ut a nd sta tuto ry le vy (if a pplic a b le ) E L SS – E q uity L inke d Sa ving Sc he me , SI P – Syste ma tic I nve stme nt Pla n T a x b e ne fits u/ s 80C unde r the I nc o me T a x Ac t, 1961, e xe mptio ns a re sub je c t to pre va iling ta x la ws
ELSS v/s OTHER INVESTMENT OTHER INVESTMENT OPTIONS Minimum Tenure / Lock Tenure / Lock Interest / Interest / Maturity Amount Maturity Amount Tax Saving options Investment Amount SIP Facility in period Return Taxability (Rs.) Dividends & Long Term Equity Linked Savings Market linked 500/ ‐ 3 Years Yes Capital gains are tax free, Scheme (ELSS) * subject to STT subject to STT Public Provident Fund 500/ ‐ 15 Years** Fixed # Not available Interest accrued is Tax ‐ free (PPF) Interest is added to Tax ‐ Saving Term Deposit 100/ 5 Years Fixed Not available income and Taxed 100/ ‐ 5 Years Fixed Not available income and Taxed with Scheduled Banks accordingly Interest is added to Infrastructure Bonds 5000/ ‐ 3 ‐ 10 Years Fixed Not available income and Taxed accordingly Interest is added to National Savings 100/ ‐ 5 Years Fixed # Not available income and Taxed Certificate (NSC) accordingly ## * Ma rke t linke d – Re turns a re sub je c t to ma rke t risk. ** Pre ma ture withdra wa l unde r PPF ** Pre ma ture withdra wa l unde r PPF is a va ila b le fro m 6th fina nc ia l ye a r Ho we ve r the full a mo unt c a n b e withdra wn a fte r 15 ye a rs is a va ila b le fro m 6th fina nc ia l ye a r. Ho we ve r, the full a mo unt c a n b e withdra wn a fte r 15 ye a rs. # Re vie we d pe rio dic a lly. # # T he inte re st po rtio n re inve ste d is a lso e lig ible fo r ta x re b a te u/ s 80C o f I T Ac t , 1961 T a x b e ne fits a re sub je c t to the pro visio ns o f the I nc o me T a x Ac t, 1961 a nd a re sub je c t to a me ndme nts, fro m time to time . F o r mo re info rma tio n o n the ta x pro visio ns, ple a se re fe r to pre va iling I T la ws . SI P – Syste ma tic I nve stme nt Pla n, ST T - Se c uritie s T ra nsa c tio n T a x
DO I HAVE ENOUGH MONEY RIGHT NOW TO INVEST Choose the lump ‐ sum option to Invest in ELSS, up to Rs. 1.50 lakhs to avail the tax exemption avail the tax exemption u/s 80C of IT Act, 1961 If Yes, Invest Now! Invest small amounts at regular intervals rather than investing lump sum amount at If No, Plan SIP! one time.
PLAN YOUR TAX INVESTMENTS TODAY, NOT IN MARCH The Benefits of Systematic Monthly Investment through SIP The Benefits of Systematic Monthly Investment through SIP Lighter on the wallet Takes out the risk of market timing Whe n yo u she ll o ut T he risk o f ma rke t Sa ving re g ula rly is e a sy One do e sn’ t ha ve to SIP is Simple vo la tility g e ts ne g a te d lump-sum mo ne y in a wo rry a b o ut whe n to Auto de b it fa c ility a s yo u tre a t yo ur Inve stme nt Plan, with mo re units b e ing sing le do se , yo u a re a va ila b le a c ro ss Ba nks, inve st c o nside ring da ily a va ila b le a c ro ss Ba nks inve st c o nside ring da ily inve stme nt a s pa rt o f inve stme nt a s pa rt o f Rupee Cost Averaging mo re tha n like ly to b e purc ha se d whe n the take the SIP r oute no ne e d to fo llo w up fo r ma rke t mo ve me nts, a s yo ur mo nthly b udg e t. c a sh-stra ppe d in the fund NAV is lo w a nd for Pote ntial inve stme nts o n mo nthly As inve stme nts thro ug h syste ma tic inve sting mo nth o r two a fte r. SI fe we r units b e ing P We alth Cr e ation a SI re duc e s the risks P c a n b e a s lo w a s b a sis. b o ug ht whe n the fund will he lp yo u to pla n No Liquidity Crisis Rs. 500 pe r mo nth sig nific a ntly. NAV is hig h NAV is hig h we ll we ll. Ease of Investment
SIP ‐ BENEFIT FROM RUPEE COST AVEREGING F or illustr ation pur pose only Inve stme nt NAV Unit Ac c umulate d Inve stme nt Month Amount (Rs.) (Rs.) Bought Units Value 1 1000 16 63 63 1000 2 1000 17 59 121 2063 Ave r age NAV pe r unit ove r 12 months = 3 1000 16 63 184 2941 (16+17+16+15+15+16+17+18+20+19+18+18)/ 12 o r (16 17 16 15 15 16 17 18 20 19 18 18)/ 12 o r 4 1000 15 67 250 3757 Rs. 17.08 5 1000 15 67 317 4757 6 1000 16 63 380 6075 7 1000 17 59 438 7454 8 8 1000 1000 18 18 56 56 494 494 8893 8893 Ave r age Cost pe r unit ove r 12 months = 9 1000 20 50 544 10881 12000/ 708 o r 10 1000 19 53 597 11337 Rs. 16.95 11 1000 18 56 652 11740 12 1000 18 56 708 12740 T t l T otal 12000 12000 708 708 Ave r age Cost pe r unit will always be le sse r than the Ave r age NAV pe r unit, r e gar dle ss of the mar ke t move me nts, whe n the SIP amounts ar e same in a give n pe r iod
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