Not many people know this, but the Income Tax Department of India has made provisions for citizens to invest in certain financial instruments and schemes that offer tax exemptions. This means that by prudently investing your income, you can significantly reduce the amount of tax payable on your gross annual income. And, the recent income tax return extended due date has given taxpayers more time to align their investments accordingly.

Equity Linked Saving Scheme

One such provision is the Equity Linked Saving Scheme (ELSS), a type of mutual fund that qualifies for tax exemption under Section 80C of the Income Tax Act. Investments in ELSS are locked in for a period of 3 years, and the returns are generally higher than other fixed income instruments. However, it is advisable to compare mutual funds before investing your money in them.

Here’s how you can get the most out of your tax saving funds:

1. Understand the Tax Saving Provisions:

 The first step to maximizing your tax savings is to have a clear understanding of all tax provisions. For instance, the government, under Section 80C, provides tax benefits up to Rs. 1.5 lakh, that apply to several financial instruments including mutual funds, ELSS, PPF, and others.

2. Select the Right Scheme after Comparing Mutual Funds: 

With a plethora of mutual funds available, it’s essential to compare mutual funds to find the one that suits your financial goals the best. Analyze the performance, fees, tenure, fund manager’s expertise, and other factors before making a decision.

3. Exploit the Extended Due Date: 

The income tax return extended due date could be a big stress buster for taxpayers. This window should be used to usefully channelize finances to take maximum advantage of tax-saving funds.

4. Keep Track of Your Investment Portfolio: 

Regular monitoring of your investment portfolio helps in making necessary adjustments to get maximum returns. Assess the performance of your funds, make suitable asset allocations, and balance the risk and reward.

5. Start Early and Keep Investing:

 The earlier you start, the more time you give your investments to grow. It is beneficial to make investments at the start of the financial year rather than waiting for the last few months.

6. Diversify Your Investments: 

Diversifying your investments not only minimises risk but also ensures good returns. It’s wise to diversify across different asset classes and financial instruments.

In conclusion, to get the most out of your tax saving funds, it’s crucial to understand the tax-saving provisions, compare mutual funds, exploit the income tax return extended due date, and regularly monitor and diversify your investments.

Disclaimer: The information provided here is for informational purposes only. It is always advisable to gauge all the pros and cons when trading in the Indian financial market. Always seek professional advice before making any investment.

See also: app for mutual funds

Summary:

Understanding tax provisions and the benefits of tax-saving funds is the first step to making the most out of your investments. Comparing mutual funds can aid in finding suitable investment schemes. Moreover, the income tax return extended due date provides an opportunity for taxpayers to organise their finances effectively. Regularly monitoring investment portfolios and starting investments early in the year can also optimise tax-saving funds. Lastly, diversifying investments across various asset classes and financial instruments is encouraged to minimise risk and ensure good returns. However, it is always advisable to seek professional advice before making any investment in the Indian financial markets.