The tax savings plan must be for the whole year

Mumbai: With just one month to go until the end of the current fiscal year, taxpayers are once again rushing to invest in popular tax-saving options. These include equity-linked investment schemes (ELSS through mutual funds), the Public Provident Fund (PPF), the National Pension System (NPS), fixed rate bank fixed deposits of a five-year term and life insurance policies. Health insurance policies also bring tax benefits to buyers. But as a tax-saving option, these generally see no jump in the last three months of the fiscal year.
Financial planners, investment advisers and distributors of financial products have declared that the best strategy for any taxpayer to save on taxes is to invest regularly, throughout the year, and not just during the last fiscal month. For example, if a taxpayer invests in ELSS plans using the Monthly Systematic Investment Plan (SIP), this could also limit the strain on their household budget over the past three months.
Like investing in ELSS through the monthly SIP channel, one can also set up a process to regularly contribute to an NPS account as well as a PPF account. That way, using monthly credits in the bank account, part of it could be invested to help the process of saving taxes through regular contributions, financial planners and advisers said.
But like every year, this time too, investors are deploying funds in tax-saving instruments in the January-March period, investment advisers and distributors of financial products said. For example, in January alone, the net inflow into ELSS plans was nearly Rs 805 crore. By comparison, it was Rs 567 crore in December and just Rs 174 crore in November 2021, according to data from industry trade body MF Amfi.
According to Priti Rathi Gupta, founder of women’s financial platform LXME, investors are overworked to invest in tax-advantaged mutual funds as it is the last quarter of the financial year.
Under various sections of the IT law, the government allows taxpayers to invest in a set of approved financial products, insurance policies, etc., to receive tax benefits. For example, under Section 80C of the Act, one can invest in these approved products and policies to claim tax-free income of Rs 1.5 lakh per annum and thus save on tax. There are options to save an additional 50,000 rupees per month by also investing in NPS, the advisers said.
According to Founder and Chairman of Arthbodh Shares & Investments, Bhushan Mahajan, apart from the popular tax saving products, there are additional options through which one could save more taxes. Although the principal part of the home loan repayment is included in the Rs 1.5 lakh limit, taxpayers could save up to an additional Rs 2 lakh per year to pay the interest of the same home loan. “If husband and wife take out a home loan jointly, each could separately save up to Rs 2 lakh under this option,” Mahajan said.
A little more tax could also be saved if one had taken out a student loan and repaid it. The interest portion is deductible from income and there is no cap on it. The principal portion, however, is not deductible, Mahajan said.

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