Top 11 Popular, Smarter and Best Ways to SAVE TAX after BUDGET 2021

Top 11 Popular, Smarter and Best Ways to SAVE TAX after BUDGET 2021



Top 11 Popular, Smarter and Best Ways to SAVE TAX after BUDGET 2021




For Tax Planning & Investments, these Tax Saving Options have been evaluated on following 10 Key Parameters: 1. Returns 2. Taxability of Income 3. Safety 4. Liquidity 5. Costs 6. Flexibility 7. Ease of Investment 8. Transparency 9. Suitability for whom 10. Advance smarter way of Investment


Rank No. 1 – Highest (Excellent); Rank No. 11– Lowest (Poor) 

RANK - 1:     ELSS (Equity Linked Savings Scheme) from Mutual Funds

BENEFITS

Parameter

Value

LIMITATIONS

 

Ø  Potential to give High Returns.

Ø  Shortest Lock-In Period in industry for Tax Saving

Ø  Easy to invest options – monthly, quarterly or yearly

Ø  Do not choose Dividend option, which can push up your liability since dividend are included in your income resulting taxed at normal slab rate.

Returns

Average 15.49% (Past 5 Years) *

* Returns are annualised data as on 20-Jan-2021 Source: Value Research

Market is all time high - Sensex is close to 50,000 and future performance may be slightly poor.

 

 

Lock-In Period

3 Years

 

Tax Benefit under Sec

u/s 80C

(Max. 1.5 LAKH per Financial Year)

 

Suitable for whom

Service Class, Businessman, Retired Person

 

Taxability on Profit

10% long term capital gains beyond         1 LAKH.

 

 

 

RANK - 2:     NPS (National Pension System) from PFRDA

BENEFITS

Parameter

Value

LIMITATIONS

 

Ø  If you are exhausted u/s 80C 1.5 LAKH limit, then you can save additional Tax - 50,000 using NPS. Also, If Employer contributes upto 10% of Basic Salary of the Individual, that amount is tax free.

Ø  Though NPS is most Suitable for higher 30% Tax slab Individuals for additional tax savings; It can also give tax savings to 10% and 20% Tax slab Individuals.

Ø  NPS Allows to choose & change Asset Mix besides changing their pension fund manager.

Ø  Lowest Fund management charges of 0.01% (or Rs. 10 per 1 LAKH Investment).

Ø  PRAN (Permanent Retirement Account Number) CARD is issued after account opening and minimum contribution is Rs. 1000 per Financial Year.

Ø  NPS Tier-1 account is the primary NPS account targeted to create retirement corpus & avails tax benefits. Tier-2 account is just like a voluntarily savings account which offers more flexibility in terms of withdrawals and deposits without tax benefits.

Returns

11% – 14.3%

(Past 5 Years)

Ø Liquidity may be issue for few investors as Lock-In period is till Retirement.

 

Ø You have to purchase at least 40% of the accumulated wealth to purchase a Pension Fund which is compulsory.

 

Lock-In Period

Till Retirement

 

Tax Benefit under Sec

u/s 80CCD (1b)-Directly by Individual;

u/s 80CCD (2)-Through Employer

 

Suitable for whom

Any Indian citizen Up to Age 60- including Service Class, Businessman, Shopkeeper, Vegetable Seller, Maid etc.

 

Taxability on Profit

You can withdraw 60% of the accumulated wealth & it is completely tax free after retirement.

 

 

RANK - 3:     MEDICLAIM from Health Insurance Companies

BENEFITS

Parameter

Value

LIMITATIONS

 

Ø  Due to changing Lifestyle & health issues, it is recommended to have a MEDICLAIM - Health Insurance Policy (Family Floater) for you & your Family. This will pay you CASHLESS or Reimbursement of Hospitalization Expenses due to any accident or disease for any family member, resulting Financial Security, safeguarding your Investments/other Financial Goals, peace of mind and tax rebate on paid premium.

Ø  Note that, in addition to Premium Paid towards Mediclaim policy i.e. Upto Rs. 1 LAKH (as per CASE-I, II, III, IV), it is NOT known to many people that Under Sec 80D, you can also claim for tax rebate on PREVENTIVE HEALTH CHECK-UP Expenses Upto Rs. 5,000 jointly within overall limit of u/s 80D such as pathology lab tests etc. for self, spouse, kids, parents.

Returns

Financial security due to Hospitalization Expenses for entire family and safeguard your Investments/other financial goals  & Peace of mind

Premium for Mediclaim policy may look like additional expenses; however, one should consider yearly Premium for Mediclaim as any other monthly Household expenses like school fees, electricity bill etc. and budget head should be planned.

 

Lock-In Period

Not Applicable

 

Tax Benefit under Sec

Overall Limit per Financial Year u/s 80D (Including 5,000 for Preventive Health Check-up) is as follows:

Case-I: For Individual (Self + Spouse +Kids) below 60 – Rs. 25,00 {Overall Rs. 25,000}

Case-II: For Individual (Self + Spouse +Kids) below 60 – Rs. 25,00, and parents below 60 years: Rs. 25,000 {Overall Rs. 50,000}    

Case-III: Individual (Self + Spouse +Kids) below 60 - Rs. 25,000 and parents above 60 years: Rs. 50,000 {Overall Rs. 75,000}

Case-IV:  Individual (Self + Spouse +Kids) Above 60 - Rs. 50,000 and parents above 60 years: Rs. 50,000 {Overall Rs. 1,00,000}

 

Suitable for whom

For everyone husband, wife, kids, Parents; HUF Members

 

Taxability on Profit

Tax Free

 

 

For any Query or to avail services on Personal Finance, please feel free to contact via MicroCosmic.Services@gmail.com or +91 91310 84338

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To be Continued…

Vikas Gupta, MBA                                                                     

CERTIFIED FINANCIAL PLANNERCM