Most organizations in India follow a yearly tax declaration and documentverification cycle. At the start of a new financial year, the HR department or the finance team asks employees to declare their tax-saving investments for the year. However, in case the employee fails to declare, the employer starts deducting tax (TDS) (if applicable).
It is at the end of the year, i.e., during December, January or February that the HR comes calling for proof(s) of investment. This is when employees are expected to furnish the supporting documents for the declarations they made at the start of the year.
While most organizations follow this cycle and employees are aware of the timelines, some are found unprepared. This is because they would not have actually made the investments they declared they would. In such cases, since employees are not able to submit the required documentary proofs, the accounts department recovers the tax benefits extended throughout the year, in the February or March salary. In order to prevent this, employees make last-minute tax-saving investments, and often end-up taking rash decisions.
However, one must not procrastinate. There are enough and many tax saving opportunities, and mutual fund companies offer a hassle free investment product that can help you.
ELSS Mutual Funds
ELSS or Equity Linked Savings Schemes are designed to offer long-term wealth creation as well as tax savings. With ELSS, one can get tax savings on investments up to Rs. 1.5 lakh per financial year, under Section 80C of the Income Tax. These also have a lock-in period of three years (least among tax-saving financial products).
ELSS funds invest in the equities market and therefore carry high risk and have a potential for delivering high returns.
When you opt for SIPs, you buy during different market conditions, thereby diversifying your risk. You also stand to gain from Rupee Cost Averaging. Since SIP amounts are directly debited from your bank account, you do not need to worry about missing a deadline. This way, you can be rest assured that when the HR calls, you will have the required proofs (your mutual fund investment statement) ready.
Of course, ELSS is only one of the many tax-saving avenues that help you get organized and disciplined, so that you invest small amounts regularly, across the year. Here is a comprehensive list of the other tax savings declarations one can make.
1. Life Insurance Premium - 80C
2. Public Provident Fund - 80C
3. National Savings Certificate - 80C
4. Unit Linked Insurance Plan - ULIP - 80C
5. Tuition Fees - 80C
6. Term Deposits FD for five years or more with banks- u/s 80C
7. Re-payment of Housing Loan Principal/Registration cost - u/s 80C
8. Post Office Savings Bank (CTD) - u/s 80C
9. Pension fund set up by any Mutual Fund - u/s 80C.
10. Deposit scheme of National Housing Bank (NHB) - u/s 80C
11. Approved Superannuation Fund - u/s 80C
12. Contribution to Pension Fund - Insurer(80CCC) -u/s 80C
13. Sukanya Samriddhi Scheme New Rules 2016 - u/s 80C
14. Deduction in respect of contribution to pension scheme of Central Government - u/s 80CCD
15. Medical Insurance Premium - For Spouse and Children - u/s 80D(2)(a)
16. Medical Ins. Premium - For Parents - u/s 80D(2)(b)
17. Medical treatment Expenses on handicapped Dependent
18. For Handicapped Dependent with a disability - u/s 80DD
19. Medical Treatment under specified diseases– u/s 80DDB
20. Interest on Education Loan - u/s 80(E)
21. Interest on Home Loan - Additional - u/s 80EE
22. Donations to certain Funds, Charitable Institutions etc. - u/s 80G
23. Deductions are respect of rents paid - u/s 80GG
24. Interest income earned from a savings account - u/s 80TTA
25. Interest income earned from a savings account - u/s 80TTB (Applicable for
Senior Citizens and introduced from 1st April 2018)
26. Deduction in case of a person with a disability - u/s 80U
27. Equity Savings scheme notified by the Central Government - u/s 80CCG
28. Interest on Housing Loan - 24
29. Loss on Housing Property
30. Leave Travel Allowance (LTA)
31. House Rent Allowance
So, there you have it, while the above avenues might not be available to every employee, there are several avenues to save tax. You can consult your financial advisor for more details.
By being proactive and having a long-term view, you can make the most of these opportunities and not be drawn into quick-fix solutions. To know more about ELSS and to get started, visit www.idfcmf.com .
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