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Finity Weekly Update (Issue #8): Tax saving under Section 80C and other updates

  • Akshatha Sajumon
  • 01 Dec
  • 2 minutes

The avoidance of taxes is the only intellectual pursuit that carries any reward.

— John Maynard Keynes

Quite often, we rush to make the least thought-through tax saving investment (the easiest like insurance plan & PPF being the most popular) with a short-term view to save on taxes.

Have you ever wondered if the same investment could also help you build wealth and take you closer to your financial goals? Probably not.

Here’s a cheat-sheet to help you choose the best tax-saving option to utilize your section 80C’s INR 1.5 Lakh tax-deductible limit.

Hint: Look for the lowest lock-in & highest potential return.

Options available under the section 80C basket:

Amount invested for yearsPercentage appreciationPercentage depreciation
1 year67%32%
3 years87%13%
5 years93%7%
7 years99%1%
10 years100%0%
Analysis based on the performance of Nifty index from Nov 2016 to Feb 2018

Trivia:

Sagar had started a SIP of INR 12,500/month (INR 1.5L annually) in an ELSS mutual fundICICI Prudential Long Term Equity Mutual Fund ten years back.

Over this period, he saved almost INR 4.5 lakhs in yearly taxes while his investment has grown to INR 32 Lakhs! A total gain of INR 21.5 Lakhs in ten years!

What happened there? It’s the power of equity, compounding and a wise tax-saving investment that made all the difference.

We recommend you to watch a brief video by Nirav Karkera (who heads the Research team at Finity) listing the best tax-saving funds for year 2018-19:

Equity as an asset class is by far the most dominant when it comes to building wealth. A classic display of the power of equity was the performance of TCS shares in the past week.

Shares of TCS gained the most this week. Since it got a clean-chit in the controversial racial-discrimination lawsuit filed in the U.S. Digital funds have been the biggest winners along with TCS.

 

TCS Share Price (22 Nov-30 Nov 2018)

MeasuresObjective
NPA classification will now not include the 90- day moratorium on loansSecuring banks' books & entity classification as RBI rolls out aggressive measures
TLTRO 2.0 worth Rs 50,000 croreLiquidity boost to NBFCs, HFCs & MFIs
Special refinance facilities of Rs 50,000 cr to NHB, SIDBI and NABARDSystemic liquidity support to small enterprises
LCR requirement for SCB to be brought down from 100 percent to 80 percent with immediate effectCommercial banks deposit less with RBI, keep more with themselves for liquidity
Fixed reverse repo rate under LAF cut by 25 bps to 3.75 percent from 4 percent with immediate effectUnattractive for commercial banks to deposit with RBI, might as well lend
For large accounts under default, additional provisioning of 20 percent is required for not implementing resolution in 180 days. This has now been relaxed.Breathing space for banks, leaving more towards the banks' liquidity

 

Stock Market in last week

Fund news:

If you have any questions, please write to us at ask@fisdom.com or call at +918048039999, Finity’s team would be happy to answer your query.

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Akshatha Sajumon