Vice President - Human Resources
Want to lighten your tax burden? Here's help

Lokesh Nathany

March 03, 2008

March 31, 2008 is well nigh and you must be wondering of different ways to lower your tax burden. Of course, the hike in income tax exemption limit for men to Rs 1.5 lakh and for women to Rs 1.8 lakh will be effective April 1, 2008.

But if you want to do some last-minute tax saving trick then here's some advice from Lokesh Nathany, national head (Wealth management & portfolio management services) at Almondz Global Securities.

How many ways can a salaried person save on income tax? I mean u/s 80C, 80D etc.?

An effective tax planning can help salaried individuals save tax. They can resort to the following avenues to lighten their tax burden:

Sec 24: Interest paid on housing loan to the extent of Rs 1,50,000 if the loan was taken after April 1, 1999 and Rs 30,000 if the loan was taken before April 1, 1999.

Sec 80C: Under Section 80C, you can invest up to a maximum of Rs 1 lakh in a variety of schemes like the National Savings Certificate (NSC), Notified bank deposits, Employee Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS) floated by mutual funds, Life Insurance premiums and deferred pension plans.

Sec 80CCC: You can invest within the overall limit as specified u/s 80C in Pension plan of life insurers.

Sec 80D: This section covers medical insurance policies taken for self, spouse, dependant parents and children or any member of the Hindu Undivided Family (HUF). The maximum limit is Rs 15,000. For senior citizens it is Rs 20,000. This amount is deducted from your taxable income.

Sec 80 DD: This section covers expenses on medical treatment of a dependant who is a person with disability. The maximum amount allowed is Rs 50,000 or Rs 75,000 for a person with severe disability.

Sec 80 DDB: This section covers expenses on the medical treatment of a specified disease. The maximum amount allowed is Rs 40,000 for persons below the age of 65 and Rs 60,000 if the person is above the age of 65.

Sec 80 E: This covers payment of interest on loan taken for higher studies. The deduction is available only for the interest amount.

Sec 80G: This covers donation to certain funds and charitable institutions. The qualifying amount is 50 or 100 per cent of the donation amount subject to 10 per cent of your gross total income.

Which equity linked saving schemes, ELSS, would you recommend for tax savings?

The ranking keeps changing everyday. Therefore it is very difficult to pinpoint the clear top performer. I would suggest one can look at SBI [Get Quote], Fidelity, HDFC [Get Quote], DSP, Kotak to name a few who have done well in the recent past.

In ELSS, can I show the amount earned over the year as an amount invested? If I invested Rs 1,000 initially a year back and over the current year if I earned Rs 300 on it, can I show Rs 300 as my investment?

The amount of appreciation cannot be shown as additional investment. If you have chosen dividend reinvestment option and you get units allotted after the dividend is declared, it can be treated as investment and not otherwise.

After how many years is tax exemption available under ELSS? Is tax payable on the earnings from ELSS after 3 years?

As per the current tax laws, all long-term returns from equity mutual funds are exempted from tax. Since ELSS has 3 years of lock-in by default returns are tax free.

Does investment in ELSS give 100 per cent rebate u/s 80C?

The rebate is restricted up to a maximum amount of Rs 1 lakh under the overall limit u/s 80C.

I want to invest in tax saving ELSS through SIP. Which are the best SIPs?

Systematic investment plans, SIPs, as a way of investing is only a tool to channelise your investments over a period of time through rupee cost averaging. As to which are the best funds to invest in, the ranking keeps changing everyday. Therefore it is very difficult to pinpoint the clear top performer.

Which mutual funds amongst closed and open ended funds are best in terms of returns irrespective of tax benefits? Further, which mode will give more returns ie one time investment or SIP?

There is not enough history of close-ended funds barring ELSS to really gauge their performance vis-a-vis open-ended funds. In terms of open-ended funds, the last couple of years have been extremely good for infrastructure funds. Due to the focus on the crumbling infrastructure in the country, a lot of investment is being channelled into this sector. Hence, the great interest of investors in the infrastructure theme.

We expect Indian equity markets to be volatile as they mature. In a volatile market, SIPs will always work better then one time investments. Only if the markets are expected to be in a secular bull run with very little volatility, one can look at making one time investments.

Disclaimer: Both the author and the website have taken proper care while providing the above information. However, investors are advised to consult a financial advisor for their investment decisions. Either the author or the website will not be responsible for their investment decisions.

From India, New Delhi
Its very confusing,could’nt understant much. Can you give me some contact no so that I can diretly speak to you or someone who can guide me on this. regards Rajdeep 9892953306

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