Here's how you can plan and save your taxes!

Come March, we all scramble to look for ways and means to try and save paying these taxes. Investing in tax-saving instruments and claiming certain expenses that are eligible for tax deduction are some of these last-minute activities.

Let’s talk about a smarter way to do this.

Equity-linked saving schemes, or ELSS, is a category of mutual funds. Generally, investing up to ₹1,50,000 each year in these funds is eligible for tax exemption under Section 80C* of the Income Tax Act, 1961.

These funds invest in equities, so what it means for investors is that they not only avail tax benefits but can also benefit from the growth potential that equities may offer over the long term.

Investing for tax-saving purposes in one go may not be possible for most people, here's what you can consider. 

Enter SIPs.

Along with the discipline of setting aside funds each month, SIPs ensure that you are not feeling the pinch of a big payment as your funds are invested through the year. You need not wait for the opportune time to invest either, as SIPs invest at all levels, ultimately leading to costs being averaged out.

An SIP in Kotak Tax Saver Fund, an ELSS, would have generated 15% returns over one year, while over a three-year period, the returns would have been over 25% compounded year-on-year^.

The fund's performance over its benchmark Nifty 500 TRI over both a one-year and three-year period^ has also been better.

What are you waiting for? Be smart, and consider automating your tax planning. Start an SIP Today!

 

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*This is applicable assuming the person is in the old tax regime. The Finance Bill, 2020 has proposed a New Personal Tax Regime where most of the deductions/exemptions such as section 80C, 80D, etc. are to be foregone. This is however optional.

^For detailed scheme performance please refer below. Past performance may or may not be sustained in future.

This fund is managed by Mr. Harsha Upadhyaya. View other funds managed by him.

Mutual fund investments are subject to market risks, read all scheme related documents carefully.