There is only one and a half month left to end the financial year 2020-21. It is often seen that at the last moment many people invest thoughtlessly for tax savings. At times, he invests money in more than one life insurance policy and other such options where there are very few returns, while there are many means for tax savings, including PPF, where there is a high return including the double benefit of tax savings. . You can get more out of it by strategizing in advance and assessing your financial situation.
How much discount
First of all, you should assess how much to invest so that you can get maximum profit. Under Section 80C of Income Tax, you can get tax rebate of up to Rs 1.50 lakh on investment. This includes PPF-EPF, principal repayment of home loan, life insurance policy, ELSS and other investment options. If a rebate of Rs 1.10 lakh is being made by combining the principal of EPF and home loan, then you can avail a rebate on Rs 40 thousand insurance, tuition fees for children. At the same time, under Section 80D of income tax, you can get tax rebate on the entire amount of interest of 25 thousand rupees on health insurance policy and education loan under 80E. At the same time, under the 80 EEA, you can get a tax rebate of Rs 1.50 lakh on the interest payment of the home loan.
This is how to choose investment
The ELSS has a lock-in period of three years. While PPF has a lock-in period of 15 years. At the same time, you can withdraw funds only after retirement in NPS. In such a situation, carefully choose the investment options according to your need so that you can easily withdraw money on the need. Financial advisor Vasavaraj Tonagatti says that investment in equity should be aimed at at least five years. Risk in equity is reduced in the long term. He says that the minimum lock-in period in ELSS is three years but the investor should invest with a target of five years. Also, there should be a balance between equity and debt which will reduce the risk on the portfolio.
Make your budget before investing
Before investing for tax saving, you should assess your expenses and savings. After spending all kinds of money, you are saving 20 thousand rupees every month, then decide to invest accordingly. In this situation you can invest 15 thousand rupees in ELSS and five thousand rupees in PPF for convenience. However, keep in mind that if you force it through a SIP in ELSS, then the lock-in period will proceed accordingly. If you invest in ELSS through SIP in January 2021, then the lock-in period will be January 2023 whereas if you invest in February 2021 it will become February 2023.