Do you know the various investment options that you can put your money in to save taxes? What is the optimum mix if you were to invest your money into mutual funds, public provident fund and insurance policies?
Do you know five good mutual fund schemes that offer equity linked saving schemes, ELSS, that help you save taxes as well as earn decent returns?
What about a mix of ELSS and SIPs for generating returns and planning for tax saving?
In a chat with readers on July 10, Get Ahead tax expert Mahesh Padmanabhan answered these and many more queries related to tax planning and the instruments that you can opt for saving taxes.
For those of you who missed the chat, here is the transcript.
Part II: Why you must file your tax returns
ktreddy asked, Hi, I want to invest Rs 30K in ELSS for tax saving. Is it ok to invest Rs 15K each in Kotak and SBI ELSS?
Mahesh Padmanabhan answers, Generally most of the ELSS schemes are good as they work with a time frame of minimum 3 years. However, few good ELSS funds are SBI, HDFC, Principal PNB, Pru ICICI, Birla Sunlife etc. These should not be construed as specific order of sequence from me but these are definitely good funds. Moreover you would do well if you invest in Systematic Investment Plan (SIP) of any funds instead of investing your money in one go.
ktreddy asked, I have invested Rs 32K premium for an LIC policy. I want to invest the remaining Rs 68K as follows Rs 50K in MF's, Rs 18K in PPF. Is my breakup good? Can you please advice how to invest Rs 68K. My age is 26 years.
Mahesh Padmanabhan answers, Look at life insurance as a risk cover avenue instead of Section 80C investment. If your advisor comes up with a risk cover that might need certain amount that is in excess of the Rs 1 lakh Sec 80C limit go ahead and do the same. Otherwise your composition seems ok.
Vipps asked, Hi Mahesh. I am furnishing two housing loans in my name. One is in a different city of my work and the other is lying vacant. So, I am staying in a rented accommodation. My query is that, can I ask my employer to give me full benefit (> Rs 1,50,000) of the interest component of my housing loans, as none of them are self-occupied? My employer is giving me the benefit of only Rs 1,50,000 in total in the interest component. Please advise as to where can I get the clear statement of the clause for I need to show it to them for rectification?
Mahesh Padmanabhan answers, In case you have more than one owned house property, then you would need to declare one house as deemed to be let out. In this case you would need to broadly work out the let out value and include that as income (regardless of there being no real income).
In this case, here's what you need to do: 1. Work out the rental value of the property that would fetch lower rental and work out the taxable value of rent (after standard deduction) and deduct the entire interest component of your loan. 2. For one house being treated as self-occupied, consider the interest payout as the negative income subject to limitation of Rs 1.5 lakh. 3. Work out the HRA deduction for the rent you are paying. All in all you might end up getting a bigger deduction than what you are currently claiming. Definitely you would need to consult an advisor to finalise this aspect.
HI asked, Hi Mahesh, I got the possession of the house this week for which I am paying loan from 2005. Will I be able to claim the interest paid on a pro-rata basis? What are the limits?
Mahesh Padmanabhan answers, You could claim the deduction for interest paid in the pre-construction period in 5 equal installments from the year of completion of construction. The limit is however, the same as Rs 1.5 lakh of housing loan interest payout.
HI asked, I have invested in tax-saving non-SIPs funds. Can I sell off after one year? Or do I need to hold till 3 years similar to the SIP ones?
Mahesh Padmanabhan answers, Yes you would need to hold on to these for 3 years regardless of whether these investments are SIP or non-SIP investments.
HI asked, My dad is retired and over 65. He has no income except for income from investments. Does he still need to file returns?
Mahesh Padmanabhan answers, He would need to file returns for his income in case his total income (before considering deduction under Sec 80C) exceeds Rs 1.85 lakhs.
punit asked, Pleae clear the confusion over 1. HRA exemptions 2. Can we show employer & employee PF contribution for tax rebate?
Mahesh Padmanabhan answers, Only the employee contribution to PF is considered for deduction from income under Section 80C.
gayatri asked, I am a salaried person having an income of Rs 2.4 lakhs per annum. I am a female. I have never taken a loan and this job is my first one. Can you suggest any tax saving schemes? I don't want to go for those investments which are risky. Please suggest.
Mahesh Padmanabhan answers, If your risk appetite is low, then you could go in for debt-oriented investment options. PPF for one is good as the current returns are tax free too. Life insurance schemes with guaranteed returns are good too again with the returns being tax free.
NSC certificates too returns predefined interest income but these are taxable. ELSS mutual funds though come with exposure to equity (risk slightly higher than above investments) are good as long-term investments in equity have generally return good yield.
Part II: Why you must file your tax returns
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.
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