Learning to play with tax-saving instruments
It’s that time of the year when those in the salaried bracket try and wrap-up their choice of the best asset classes to invest in, primarily with a view to save on taxes. Commonly termed as JFM (or January February and March) in the banking industry parlance, the three-month period is when financial services firms actively push equity-linked saving scheme (ELSS) of mutual funds, insurance plans and fixed deposits schemes that qualify for tax benefits. So, it definitely pays to be aware of all the available options.
Under Section 80C of the Income Tax Act, the government allows individuals to claim tax benefits on an amount of up to Rs 1 lakh and if you fall in the highest tax bracket, then you can save up to Rs 30,000 in taxes. Other than the EPF contributions and principal component of home loans, investment avenues such as PPF, ELSS of mutual funds, insurance schemes, fixed deposits of banks, NSC of post offices are some other options.
This year the government has also introduced the Rajiv Gandhi Equity Savings Schemes (RGESS), where investors can claim additional tax benefits on investment of up to Rs 50,000 in the qualifying instruments — direct equities and mutual funds.
The ideal tax-saving approach
Ideally, the planning that goes into investments into tax instruments should start at the beginning of the financial year. Not only does it reduces your burden towards the end of the year, it also helps your money to accumulate some gains over the period. For
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