No one looks forward to paying taxes, but everyone has to deal with it. So why not learn how to save on them!
Being ignorant about how you can save taxes can cost you lot of money. One of the most popular ways of savings taxes is by investing up to 1.5 lakhs per year in tax-saving investments. Depending on the tax bracket, you can save anywhere between Rs 15,000 to Rs 45,000 in taxes per year.
Now, in order to save taxes people end up investing a large chunk of money at the end of the financial year. This involves a large outflow of cash at one go leaving them at the risk of investing in equity when the markets are high. Let’s say you have to invest Rs 1.2 lakhs a year for Tax Saving Investments. Instead of investing all at once, you can invest in a SIP and pay the same amount in 12 monthly instalments of Rs 10,000.
When you invest in Tax Saving ELSS funds with a monthly SIP amount, not only is it easy on the pocket, but you also get the advantage of Rupee cost averaging and lower risk.
|ELSS Tax Saving Funds||Expense ratio||1 yr||3 yr||5yr||Current Val.**||5 yr SIP return|
|Axis Long Term Equity Fund||2.3%||74.7%||33.9%||24.8%||123,964||29.5%|
|IDFC Tax Advantage Fund||2.9%||57.1%||26.5%||18.4%||106,187||23.0%|
|Reliance Tax Saver Fund||2.1%||98.6%||32.8%||22.7%||124,024||29.5%|
|ICICI Prudential Tax Plan||2.1%||60.5%||26.5%||18.3%||106,449||23.1%|
|Franklin India Taxshield Fund||2.4%||65.5%||25.8%||19.4%||107,293||23.4%|
** If you had invested Rs 1000 per month in these funds, they would have grown from Rs 60,000 to almost Rs 1.2 lakhs