It is that time of the year, when personal finance columns are filled with pros and cons of various tax saving investments. Well…we'll cut to the chase as we always do and give you the best options for tax saving.
That's right, we'll not confuse you more with needless details. Nor too many dos and donts. So, here's a simple, ready-to-use list of products that make your choices crystal clear.
It is a year we probably don’t want to think about much, as far as the investment environment goes - a roller coaster ride with all the bad news floating around makes even the most seasoned investors quite uncomfortable. But for those of you with clear longterm goals, these are rare lifetime opportunities to correct past mistakes and invest right.
Today, we'll tackle the right tax saving options - a simple enough topic, yet a quick reminder for those of you who perhaps end up investing in the wrong product for the wrong reasons. We'll lay out what's the best combo deal for Tax Saving investments.
And here is the no-nonsense list of 80C products that you can use to complete your tax planning investments. Instead of using one product, we recommend that you use a combination of the following:
# First: Buy a basic term insurance life policy. The cheapest way to get the maximum bang for your insurance buck. Search online for the cheapest plan for your age and tenure needs.
# Second: Complete your EPF contributions. Insist that a full 12 per cent of your basic salary isn’t deducted. Your employer will match it. So not only are your saving a full 24 per cent of your basic, you also get the 80 C tax break on your part of the contribution.
# Third: Maximise your PPF investment. Maximum allowed for a risk free, tax free 8 per cent per year is Rs 70,000. Rs 19 lakh is what you get when you complete 15 years for a 70k per year investment.
Try and maximise your PPF investments even if you don’t need the 80C break. This, along with EPF, forms the core of your long term safe kitty.
# Fourth: If there is something left, choose an ELSS mutual fund. And here are some funds that viewers can choose from.
Best Tax Saving Combo : EPF+PPF+ELSS+ Term Insurance Premium
Term Policy: The only life insurance cover to buy
EPF : Contribute a full 24 per cent of the basic
PPF: Maximise to Rs 70,000
ELSS: To soak up all the rest
So, let us take you through the best options on both ELSS or equity linked tax saving schemes as well as term policies. ELSS first - the list of 3 ELSS investments with a good track record includes Sundaram BNP Paribas Taxsaver right at the top.
It is a 5 star rated fund from Morningstar; 22 per cent per annum over 5 years! And what's extremely heartening about this fund is that it has outperformed the benchmark index both in a rising market and more importantly in a falling market.
Two conservative schemes: Franklin India Taxshield and HDFC Tax Saver have both given on a 5 year basis more than 5 percentage points over their benchmarks at 17 per cent returns. Franklin is a 5 star rated fund while HDFC is a 4 star rated fund, simply because in a falling market Franklin has managed its losses better than HDFC.
But that's not all. The idea of this show is to give you readymade best choices in each category. So if insurance is not already a part of your investments, here's the list of cheapest term insurance across 10 to 30 years period from our knowledge partners apnainsurance.com. A term policy we say is an absolute must and ranks even higher than PPF as a priority if you have dependents to take care of. Here are the names of the cheapest term insurance policies across tenures from 5 to 30 years. We are showing you indicative premium for a insurance cover of 50 lakhs for 25 years.
# ICICI Prudential Life Insurance Company tops every tenure. The premium for 25 years is a little over 15000 rupees.
# Aviva Life Insurance Company stacks up right after with a premium of 16876 rupees and Canara HSBC Oriental Bank of Commerce Life insurers give you a 50 lakh cover at 17649 rupees.
Now, all of us already have expenses which may actually reduce our need to put aside money for tax saving.
Also here all the investments under sec 80C – as just a reminder that if you have them, don’t forget to account for them!
Lesser known 80 C eligible items:
# Tuition fees: For upto two kids
I'm sure you did not know about this
# Home loan: Principal of the loan
While the Rs 1.5 lakh interest tax break is well known, the fact that you can take the entire Rs 1 lakh break for the principal repaid is not so well known. This can come in useful for a person near 60 who still has the last part of a home loan to pay off, he can use this to claim the 80C deduction without a fresh drain on savings.
# NSC: Money doubles in 8 years 7 months
Good for specific targeting of a goal that is between 9 to 10 years away.
# SCSS : Senior Citizen Saving Scheme
# 5 year FDs: Special FDs are notified
The above two are aimed specially for the senior citizens who may not have a home loan, or need insurance or wait for 15 years for a PPF to mature, but need current income. Both the FD and senior citizen saving plan allow withdrawals during the tenure of the products.
# Insurance: Money back, endowment, ULIPs, pension
And with that, we end today’s show…until next time keep safe and invest smart!