Prajna Capital

Advantages of appreciation and Tax Saving with ELSS
A Cycle Of Re-Investments For Better Returns
Budget 2015 for Tax Payers

Advantages of appreciation and Tax Saving with ELSS

Posted: 04 Mar 2015 04:06 AM PST




ELSS funds are one of the best avenues to save tax under Section 80C. This is because along with the tax deduction, the investor also gets the potential upside of investing in the equity markets. Also, no tax is levied on the long- term capital gains from these funds. Moreover, compared to other tax saving options, ELSS has the shortest lock- in period of three years. Going by its name ELSS invests a majority of its corpus in equity and equity related products. An investment in ELSS comes with a lock in period and has tax benefits attached to it. It is suitable for investors having a high risk profile as returns in ELSS fluctuate depending upon the equity market and there are no fixed returns. ELSS schemes are open ended, that is, investors can subscribe to the fund at any day. NAV or the price of the fund is declared on every business day. Mutual funds Vs ELSS ( difference between ELSS and Mutual fund) Tax Free: There is no ceiling for investments in ELSS however investments in ELSS qualify for tax deductions under sec 80C of the income tax act subject to a maximum of Rs 100,000 in a financial year whereas investments under normal mutual fund do not qualify for income tax deductions. Any dividend received or long term capital gain earned by the investor is tax free. Long term capital gain arises on selling units of mutual fund after 1 year of purchase. Since there is a lock in period of 3 years every investor will realize long term capital gain/ loss on selling their holdings. Lock – In:- ELSS has a lock in period of 3 years unlike other kinds of mutual funds. Options while making an investment in an ELSS Growth option – In growth option income earned by the fund is not distributed to unit income/ profit earned by the fund increases the NAV of the fund and vice versa. Whenever the investor sells its holdings he will realize long term capital gains. Dividend option – In this option the fund distributes income earned by the fund to the investors as dividends. The date of distribution is declared by the fund, however if the fund has negative income it will not distribute any dividend. Any dividend received by the investor is not liable for tax in the hands of investors. Dividend reinvestments option – If the investors chooses this option the dividends declared by the fund are reinvested. For example, an investor is holding 10,000 units of a fund and the fund declares dividend @ 1.5 per unit, the total dividend of 15,000 (10,000x1.5) will be reinvested on behalf of the investor as a fresh purchase. The investor can claim deductions to the tune of dividend received which is Rs 15,000 in this case. Monthly investment in ELSS Monthly investments on a pre specified date in mutual funds is possible through systematic investment plan ( SIP). An investor has the option of investing monthly in equity linked savings schemes with a minimum investment of Rs 500. This type of investment is better suited to small investors who cannot invest a lump sum amount. SIP has the benefit of averaging out the cost of investors. As the amount of investment is fixed the units purchases every month varies depending upon the NAV of the fund. At a higher NAV the investor gets fewer units and more number of units at a lower time. How to Apply for ELSS To apply for ELSS an investor needs to comply with KYC regulations, Know your customer ( KYC) is mandatory whereby investor needs to provide some personal details like PAN no etc. KYC helps in reducing financial fraud. After complying with KYC the investor can approach to Asset management companies for subscribing to ELSS, Investor has to provide a photocopy of PAN Card along with the subscription form; the form should be filled properly and signed by the investor. The subscription form and a cheque leaf of the investment amount should be submitted with the AMC. In case of SIP ( systematic investment plan) one additional form should be filled and signed by the investor. The Investor has to select a date of SIP from the options provided in the form. The Installment amount will be deducted from the investor's bank account on that day of every month till further notice from the investor.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

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Invest Online

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For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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Leave a missed Call on 94 8300 8300

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A Cycle Of Re-Investments For Better Returns

Posted: 04 Mar 2015 03:24 AM PST




Investing from the cash flow of your salary or business income is fine. But you should also consider re- investing the returns generated from your past investments to meet your targeted tax savings. Dividend/ interest payments that can be invested in tax saving instruments: Use dividends paid by stocks or mutual funds to invest in a tax- saving instrument. With stock markets touching new highs, you can be sure that some of your equity investments (mostly mutual funds) will pay dividends in the coming months. Interest earned from fixed deposits, nonconvertible debentures and tax- free bonds can also be invested in tax saving instruments. Dig into matured investments: If existing investments are maturing, and, if they are not aligned to any goal, the money received can be invested in a Section 80C instrument. The investment you choose must depend on your time horizon, the composition of your portfolio and, of course, your risk appetite. Recycle tax- saving funds: If your existing ELSS investments are maturing, redeem them and reinvest the money in a tax- saving fund. If you had invested in an ELSS through a systematic investment plan, or SIP, some SIP payments may be older than three years. Redeem them and re- invest in a tax saving fund. If you have opted for a dividend re- investment plan of a tax saving fund, claim deduction on dividends that are re- invested. Claim deduction on interest from National Savings Certificate (NSC): Interest from NSC is considered to be reinvested and can be claimed as deduction under Section 80C. However, you will have to show it as income in your tax return. Claim deduction on premium for credit insurance: If you have taken a loan to buy a house, a car or for financing your children higher education, it is likely that you have bought credit life insurance, which covers the loan in case of your death. The premium for this policy can be claimed as deduction under Section 80C. Since these are treated as single- premium polices, the total premium can be deducted from income in the year it is paid. Other Avenues: Interest on Home Loan: The government has increased the deduction limit for interest paid on home loans for self- occupied houses from Rs 1.5 lakh to Rs 2 lakh. This will help individuals in the highest tax bracket save up to Rs 15,450 additional tax. If the loan is for a property in which the person does not live, the total interest paid can be claimed as deduction. No deduction is allowed on an under construction property. However, tax benefits can be claimed for five years after the house has been built. Rajiv Gandhi Equity Savings Scheme (RGESS): The scheme allows first- time equity investors claim deduction on 50 per cent of the amount invested in approved stocks and mutual funds. The maximum investment on which the deduction can be claimed is Rs 50,000. This means the deduction limit is Rs 25,000. This is only for those whose annual income is up to Rs 12 lakh. The benefit can be availed of only for three years. Health Insurance Premium: Premium for health insurance covering self, spouse, children and parents is deductible up to Rs 20,000 for senior citizens and Rs 15,000 for others. If you are paying premium for parents health insurance, you can separately claim a deduction of up to Rs 20,000. Any expense on preventive health care up to Rs 5,000 can be included. Deduction on house rent: House rent allowance ( HRA), which is part of your salary, is exempt from tax if you live in a rented house. The exemption is the least of the 1) actual HRA received from the employer, 2) house rent paid by you minus 10 per cent basic salary or, 3) 50 per cent basic salary if you live in a metro city or 40 per cent if you live in a non- metro city. You can claim deduction on the rent paid even if HRA is not part of your salary. The deduction is the least of the 1) rent paid less 10 per cent of taxable income, 2) 25 per cent of taxable income or, 3) Rs 2,000 a month.

Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015

1.ICICI Prudential Tax Plan

2.Reliance Tax Saver (ELSS) Fund

3.HDFC TaxSaver

4.DSP BlackRock Tax Saver Fund

5.Religare Tax Plan

6.Franklin India TaxShield

7.Canara Robeco Equity Tax Saver

8.IDFC Tax Advantage (ELSS) Fund

9.Axis Tax Saver Fund

10.BNP Paribas Long Term Equity Fund

You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds

Invest in Tax Saver Mutual Funds Online -

Invest Online

Download Application Forms

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

---------------------------------------------

Leave your comment with mail ID and we will answer them

You can write to us at

PrajnaCapital [at] Gmail [dot] Com

Leave a missed Call on 94 8300 8300

---------------------------------------------

Invest Mutual Funds Online

Invest Any Mutual Fund Online

Download Mutual Fund Application Forms from all AMCs

Download Mutual Any Fund Application Forms

Budget 2015 for Tax Payers

Posted: 04 Mar 2015 01:14 AM PST

What changes has the Budget brought about for tax payers?

On Saturday, Finance Minister Arun Jaitley released the Union Budget. He did not tinker with the personal tax rates and the income slabs. However, there are a few deductions / exemptions which would interest the tax payer.

Income Tax

No change in the tax slabs for individuals.

Wealth tax has been abolished.

Income Tax Relief

The finance minister stated that the individual tax payer's relief would be to the tune of Rs 4,44,200.

That break up would be:

Rs 1,50,000. Deduction under Section 80C.

Rs 2,00,000. Deduction on account of interest paid on a home loan.

Rs 25,000. Deduction under Section 80D which refers to premium paid for health insurance.

Rs 19,200. Transport allowance.

Rs 50,000. Deduction under Section 80CCD. This refers to investments in the National Pension Scheme, or NPS.

Besides the additional deduction of Rs 50,000 for investments in the NPS, employees have the option of opting for either the EPF or the NPS. For employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer's contribution.

Health Insurance

Taxpayers will be able to claim higher deductions on account of premium paid on health insurance.

The finance minister proposed to increase the limit of deduction on health insurance premium from Rs 15,000 to Rs 25,000.

For senior citizens this limit is to be increased from Rs 20,000 to Rs 30,000. Those above the age of 80 years -- who are not eligible to avail of health insurance -- deduction will be allowed for medical expenses up to Rs 30,000. The deduction limit of Rs 60,000 on expenditure on account of specified diseases will be enhanced to Rs 80,000 in the case of senior citizens.

In the case of differently-abled persons, the deduction limit has been proposed to shift from Rs 50,000 to Rs 75,000.

Investments

To encourage financial savings and attract investors going for gold, sovereign gold bonds are positioned as an alternative.

Reintroduction of tax-free bonds.

Sukanya Samriddhi Scheme is a new entrant in the small-savings schemes category aimed at encouraging savings for a girl child's education and marriage. It was launched this year. Investments in the scheme are eligible for deduction under Section 80C. In his Budget speech, the financial minister stated that even the interest earned shall be tax free.

Much more clarity was offered in respect of Real Estate Investment Trusts, or REITs, and Infrastructure Investment Trusts, or INViTs.

Foreign investors have been allowed to invest in alternate investment funds, or AIFs – a privately pooled investment fund for real estate, private equity and hedge funds. Such funds will also be given a tax 'pass through' status which will allow the tax liability to be passed on from the fund to the end-investor.