It is important that a person plans his or her finances properly. With the advice of tax saving planning service, he can get help to do so. A plan should never be made on an ad-hoc basis or for a temporary goal or towards an ill-conceived objective. By proper tax planning, one not only reduces the tax liability but also end up saving towards the various goals one has set at different life stages.
With tax saving consultant in India choosing the right tax saving vehicle rests primarily on four things:
- How to avail tax benefit
- Kind of tax saving instrument
- The tenure
- Taxability status
It is equally important to choose the tax-saving instrument which can be linked to the specific goal.
One may consider section 80C which allows annual tax benefit of up to Rs. 1.5 lakh in one or more eligible investments and specified expenses. The eligible investments are life insurance, equity-linked saving schemes, mutual funds, a public provident fund; national saving certificate, etc. Expenses and outflow can include tuition fees, principal repayment of home loan, etc.
One of the most popular Sec 80C investments is in tax saving mutual funds-ELSS funds (Equity Linked Saving Schemes). ELSS funds are equity diversified funds and one can enjoy both the benefits of capital appreciation as well as tax benefits.
As compared to traditional tax saving instruments like PPF and NSC, the lock in period for ELSS fund is much lower—3 years, while for PPF it is 15 years and for NSC it is 6 years.
You can also opt for SIP Investments with ELSS funds and also get income from your investment amount in the lock in period, if you opt for dividend schemes.
First, try to identify the goal of the medium or long term. An equity backed tax saving instrument would suit long-term goals as equity needs time to perform. As the wealth keeps on accumulating over a long period, try a tax-free investment. And before considering taxable investment, see the tax rate that applies to you and considers post-tax return also. In the long run, a low post-tax return according to mutual fund advisor will not help you in achieving anything.