How To Start an SIP To Save Tax On Your Income
October 09, 2019
Investments can be made any time during the year, whether it is a tax saving investment or just to park your excess money in the market. The only problem arises when employers ask you to submit your tax saving plans a few months before the end of the financial year. Here are a few ways you can tackle this with SIP tax saving investment.
Last moment investment can lead to a lot of risks, like picking a wrong product for investment which will not give you the desired results. So, proper planning with SIP can help you to save your taxes as well as get the desired returns on your investment.
SIP as a Tax Saving Investment
SIPs can be a good tax saving investment especially when you need to save a part of your income from taxes. With Systematic Investment Plan (SIP), you can save on your taxes and also get higher returns on your investment.
Under Section 80(C) of the Income Tax Act, 1961, investing in Equity Linked Savings Scheme (ELSS) through SIP enables you to claim a deduction of Rs 1.5 lakh from your taxable income. Whose income fall in the highest tax slab (30%) with SIP in ELSS they can save around Rs 45,000 per year.
Other than helping you to be a disciplined investor by inculcating the habit of auto-investment, SIPs also help you to plan your monthly cash in an effective way.
How to Save through SIP in ELSS
In order to encourage more participation and long-term investment in equity, the Government of India created this tax-deductible category of mutual funds. Along with the tax saving scheme, these ELSS funds also help in long term capital appreciation; thereby making this the most preferred option for tax saving as well as investment.
You can take the SIP route to invest in ELSS that helps you to benefit from rupee cost averaging on a longer horizon. Moreover, with SIP in ELSS you can invest as little as Rs 500 and increase on your investment whenever you wish to.
Start Tax Planning Early
It is always better to start your investment as early as possible in a financial year (month of April) rather than waiting till the end of the financial year and doing a lump sum investment.
This way you can avoid any last moment fanatic investment and also accumulate higher capital on your investment. With an Electronic Clearing Service (ECS) mandate, your SIP amount will be directly deducted from your bank account.
So, planning an SIP initially helps you to benefit from your financial year deadline, lessens the chances of not having enough to invest. Also prevents you from selecting an ill-suited financial asset.
These are few SIP tax benefits that you need to know. Other than these, one can also invest in SIP irrespective of the market volatility. This factor makes it a preferred choice over lump sum investment route.
While choosing your SIP scheme, it’s advisable to be clear about your financial goals, so that along with your SIP income tax benefit you can achieve your desired returns.
The contents of this document are meant merely for information purposes. The information contained herein is subject to updation, completion, revision, verification and amendment and the same may change materially. The information provided herein is not intended for distribution to, or use by, any person in any jurisdiction where such distribution or use would (by reason of that person‘s nationality, residence or otherwise) be contrary to law or regulation or would subject lClCl Bank or its affiliates to any licensing or registration requirements. This document is not an offer, invitation or solicitation of any kind to buy or sell any security and is not intended to create any rights or obligations. Nothing in this document is intended to constitute legal, tax, securities or investment advice, or opinion regarding the appropriateness of any investment, or a solicitation for any product or service. Please obtain professional legal, tax and other investment advice before making any investment. Any investment decisions that may be made by you shall be at your sole discretion, independent analysis and at your own evaluation of the risks involved. The use of any information set out in this document is entirely at the recipient's own risk. The information set out in this document has been prepared by ICICI Bank based upon projections which have been determined in good faith by lClCl Bank and from sources deemed reliable. There can be no assurance that such projections will prove to be accurate. lClCl Bank does not accept any responsibility for any errors whether caused by negligence or otherwise or for any loss or damage incurred by anyone in reliance on anything set out in this document. The information set out in this document has been prepared by ICICI Bank based upon projections which have been determined in good faith and sources considered reliable by lClCl Bank. In preparing this document we have relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources or which was provided to us or which was otherwise reviewed by us. Past performance cannot be a guide to future performance. 'lClCl ' and the 'I-man' logo are the trademarks and property of lCICl Bank. Misuse of any intellectual property, or any other content displayed herein is strictly prohibited.