Hello Readers! 

Saving tax is taken as a goal by many people in our country and for this, they often look for tax-saving instruments to invest in. There are very less people who along with saving tax, also take wealth creation as their goal and then plan their investment.

In general, if we think of tax saving as being a goal in itself, then it should be a part of your medium to long term wealth creation objective. That means while you think about saving the tax, also think about what purpose that investment is achieving.

Tax Saving Trend Is Same!

There is a range of the financial instrument that offers tax-saving objectives, right from life insurance policies to home loans, fixed deposits, and equity investments. Here the point that you need to consider is, the section under the Income Tax Act which gives you this advantage to make tax-saving investments does not distinguish between the type of investment you make.

Either you go with a tax-saving fixed deposit or an Equity Linked Saving scheme, your maximum allowable tax deduction through these investments remains the same at a maximum of Rs 1,50,000 under section 80 C of the IT Act. If this is the case then why choose such investments that allow you both options, tax saving, and wealth creation, at the same time.

Well, for the same you have to look for an investment that gives you the benefit of Compound Interest growth and calculation on your returns, that too with a rate that is higher than the inflation over the years. Choosing this investment will give triple benefit to you, first will save tax on returns, second will give proper growth to your investment in the long-term, and third, the returns will have inflation combating feature. That’s all that you want from your investment!

Plan The Goal!

For short-term goals, it is not much necessary to plan for saving tax for short-term objectives, as these investments are soon going to be used up. However, for your mid-term or long-term goals, your investment can avail the double benefit to you.

One more thing here that you have to keep in mind while picking up a tax saving instrument is financial products that also help you save tax comes with a lock-in period.

A lock-in means you can’t expect to withdraw your money after a few years or before the lock-in period ends, even during a money emergency.

Well, among all tax-saving financial product, the product ELSS (Equity Linked Tax Saving Scheme), a tax saving mutual fund, offers you the lowest lock-in period, only three years. This feature or say the flexibility of ELSS will help you plan your tax-saving investments in a manner that matches your medium to long-term wealth creation goal as well. Being an equity product, ELSS funds are featured to cater to this intersection of growing your money while saving tax.

ELSS funds have been able to deliver a 12%-14% annualized return in a 10-15-year time horizon, which shows how effective this investment is in combating the increased inflation and its effects.

So if you are planning to save your taxes and at the same time you searching for methods to grow your money, don’t go for two different funds for a different purpose, instead choose one that helps you accomplish both your goals, tax-saving returns, and good wealth creation.

For any kind of query regarding financial planning 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 of future returns).