Tax Planning is a systematic and legal way of reducing your tax liabilities in a year. It helps you utilize the legally permitted tax exemptions, deductions and benefits in the best possible way for minimizing your tax burden.

A new financial year has just begun and this is a ripe time to plan your investments, particularly the tax-savings instruments. Instead of leaving this exercise for the last quarter, which is generally what most investors tend do, start planning right away – APRIL & MAY are probably the most ideal or best months for this purpose.

There are many tax savings investment options available; here, we will attempt to help you choose the right investment option, based on your risk tolerance, financial goals, time horizon, etc. Let us evaluate the different available options in a little more detail.

Tax saving investment options, such as MF ELSS, ULIP or PPF are considered by both salaried and non-salaried tax payers. While investing, you firstly need to access the tax benefits and the returns it offers. You can avail a maximum tax deduction of up to Rs. 2 Lakhs when it comes to tax savings and the deductions are available from Sections 80C to 80U and can be claimed by eligible taxpayers under the provisions of the Income Tax Act, 1961. There are various other sections under the Income Tax Act, 1961 that can reduce your tax liabilities such as exemptions and tax credits.

There are many tax savings investment options but you may consider options like PPF, ULIP and ELSS.

Mutual Fund (MF) ELSS : Here, the fund managers can invest in shares of several companies. The difference between ELSS and a diversified equity fund is that ELSS has got the added tax benefits. As per the current tax slab of taxpayers, they get benefits ranging from 10 to 30 percent. Other than deduction benefits and the lock-in period, an ELSS is quite the same as a diversified equity mutual fund. An ELSS gives you tax deduction benefits of up to ₹1.5 lakh under Section 80C. This is the only pure equity investment vehicle that offers Section 80C deduction benefits. The returns under ELSS investments are market-linked and your money is invested in the equity market with an intention to give you the scope for earning higher returns.(Risk Profile – High)

Provident Funds - You may invest in EPF (Employee’s Provident Fund) or PPF (Public Provident Fund) schemes or both. (Risk Profile – Low)

• EPF - The Employee Provident Fund, or Provident Fund, as it is normally referred to, is a retirement benefit scheme that is available to salaried employees. Under this scheme, a stipulated amount (currently 12%) is deducted from the employee's salary and contributed towards the fund. This amount is decided by the government.
• PPF - The Public Provident Fund has been established by the Central Government. You can voluntarily decide to open one. You need not be a salaried individual - you could be a consultant, a freelancer or even working on a contract basis. You can also open this account if you are not earning.

ULIP : Unit Linked Insurance Plan is a mix of insurance along with investment. From a ULIP, the goal is to provide wealth creation along with life cover, wherein the insurance company puts a portion of your investment towards life insurance and the rest into a fund that is based on equity or debt or both and matches with your long-term goals. These goals could be retirement planning, children’s education or another important event which you may wish to save for. Smart investors consider buying pure term insurance and reject ULIPs because they no longer see insurance as an investment. ULIPs also come with heavy front loaded charges. Thus, Mutual Fund ELSS stands out from the rest of the crowd.

To conclude, every investor has a specific need depending upon his financial goals and therefore needs to undertake the tax planning exercise with absolute discipline to ensure that taxes do not eat into the final returns by prudently claiming the various exemptions available as per law. Plan your taxes wisely by choosing the right instruments for investment which are sufficiently aligned with your financial goals and your risk-bearing tolerance. We sincerely hope that this blog would greatly assist you in making the right investment choices.

Happy investing in 2019!

Founded in 2005 by new–age entrepreneur Abhishek Bansal, the Abans Group has evolved into a globally diversified conglomerate, providing expertise in Broking Services, Non-Banking Financial Dealings, Financial Services, Agri-Commodity Services, Warehousing, Realty & Infrastructure, Gold Dore Refinery & Manufacturing, Trading in Metal Products, Pharmaceuticals, Software Development & Wealth Management. The Group is a comprehensive financial and non-financial services and solutions provider, aiming to provide end-to-end solutions to its clients.