Take Additional Advantage From Tax-Saving

The main objective for any investment should always be wealth creation

Omkeshwar Singh

Updated on: 11 February 2021 7:05 pm

You can follow the tax-saving and planning approach to save tax and create wealth for yourself.

Check the tax-saving you have already made like insurance premiums, medical insurance, Employees’ Provident Fund (EPF) contribution, home loan repayment etc.
Deduct this amount from Rs. 1.5 lakh to figure out how much amount remains to invest.

Now choose tax-saving investments that help you achieve your goals and create wealth for you.

Equity Linked Saving Scheme (ELSS) funds are the most popular investment option under section 80C with the lowest lock-in period and average return better than other 80C options.

If you haven't made any other tax saving investment then you can invest up to Rs. 150,000 in ELSS fund and claim tax savings under section 80C.

Here is a quick comparison of how ELSS funds help you create wealth in comparison to other 80C investment options.

Investment	Returns	Lock-in Period
ELSS	12-15 %*	3 Years
National Pension Scheme	9-10 %	Till Retirement
PPF	7-8 %	15 Years
National Savings Certificate	7-8 %	5 Years
Bank FDs	6-7 %	5 Years

*Assumed rate of return

This way, you can figure out how to exhaust your tax-saving limit. Make an informed decision and invest in the right ELSS fund which helps to create wealth while saving tax.

Early planning and execution is the key to optimal returns on any investment or tax planning activity.

Everyone works really hard to make money but very little thought is put on making the most of the money we make. We ought to make our money work harder. This can be done by legitimately saving taxes and also letting our money compound over time and build wealth as desired.

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Give your money a longer period to grow and compound

By starting early, you have put your money to work sooner rather than later. Your money gets a longer period to compound and allows you to grow your wealth more and farther than last-minute investments in March the following year.

Reduce financial cash flow burden

Starting early gives you the option to invest smaller amounts through Systematic Investment Plans (SIPs) in a tax-saving fund rather than investing a big lump sum in January or February. For example, if you need to invest say Rs 1,50,000 towards tax saving under section 80 C, you can begin by investing Rs 12,000 a month from May to March next year. Regular investing through SIPs helps you in making smaller contributions out of your monthly salary instead of cutting a cheque for a large amount in one go.

Carefully select which ELSS fund is really good

Last-minute decisions are always hasty and inefficient. An investor doesn’t get the time to carefully select which is the correct ELSS fund. So, besides the opportunity loss of investing early, there is also a loss that could arise due to incorrect fund selection.

The author is Head- RankMF at Samco Group

DISCLAIMER: Views expressed are the author's own. Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.