Hello Readers! 

Do you know which season is trending now? Obviously, your answer will be spring season, but dear I am not talking about that, I am talking about the tax season. Yes, the tax season often comes before the month of March.

This year the last date for tax-saving investment for the year 2020-21, has been fixed till 31st March. This is the last chance for people to maximize their tax benefits under various sections unless the finance ministry extends the deadlines again like it did the last time due to the COVID-19 pandemic. But this time your plan would be a bit different from last year's strategy as Budget 2021 has come up with some provision in the tax regime.

The old tax regime allows deductions from your total income under Section 80C that includes investments such as equity-linked saving schemes (ELSS), life insurance policies, and Public Provident Fund (PPF) and Section 80D. It also allows a deduction for payment of home loan principal and children’s tuition fee. You can also claim deductions under section 24 for interest paid on your home loan. You can claim tax breaks under section 80D on health insurance premiums paid.

People generally put the important works for the last minute, and to meet the deadline, in hurry they end up making mistakes or took worse decisions that only make them repent. Here is a quick guide for you so that you won’t end up making the same mistake.


Don’t Postpone Everything For The Last Minute?

Investors are advised to start thinking about saving tax or making tax-saving, right with the beginning of the April month, but what they do, they postpone it for the last minute for the last month just before the deadline. This always ends them making a huge investment at one go, which leaves them gasping for adequate funds for their regular needs.

So, what is the right way? Starting early helps you to spread your investments through the year, thus reducing the pressure on your cashflows. For example, if you were to start contributing to your voluntary provident fund (VPF) or investing in equity-linked saving schemes (ELSS) every month from April, through a systematic investment plan (SIP), you will not have had to struggle now.


Consider Other Investments As Tax Saving!

When people in a hurry plan their tax-saving investment they often miss out on adding their tax benefits from their other existing investments. You might be surprised, but in some scenarios, people’s contribution to their PPF fund per year gets enough for their tax benefits. Not only this but your contribution towards EPF and children’s school tuition fee are eligible for deduction under section 80C. If you are contributing over Rs 12,500 per month as your EPF contribution, you do not need to look at making tax-saving investments at all.

So basically, what you need to do is, calculate all your investments be it PPF or EPF or any other. And then see how much you invest extra to get make all your investments sum-up and prove to be a tax-saving investment for you.

Secondly before investing in tax-saving investment consider a few things. Make sure that you are investing in a tax-saving fund for the long-term as these funds offer very low liquidity. In case if you are investing in tax-saving funds for the short-term, I would suggest don’t. If you need to buy a house, say, two years down the line, your ‘extra’ tax-saver investment will not come in handy as it cannot be liquidated. So, make sure you invest in the long-term.

If you are investing in tax-saving investments for big and long-term goals like the retirement you can look at VPF and PPF as these funds have a long lock-in period that is of 15 years. However, if your goal is just three years away and you can stomach market risks, you can invest in ELSS.

Keep reading for more updates on Mutual Fund Investment!!

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.


Happy Investing!


(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).