Do you know the best options for saving tax? Should you go for mutual funds, Public Provident Fund, National Savings Certificate to do this?
Which amongst the above offer the best and safest ways to save taxes? Is PPF better than NSC?
In a chat with readers on August 21, Get Ahead tax expert Mahesh Padmanabhan discussed these and other tax and investment-related issues affecting the taxpayers.
For those of you who missed the chat, here is the transcript.
VIKAS asked, LET ME KNOW THAT STILL I CAN FILE MY TAX RETURN FOR THE AY 2007-08?
Mahesh Padmanabhan answers, You can file your return even now without any penal interest if your entire taxes have been paid. In case you do not file your returns on or before March 31, 2008 then a penalty of Rs. 5000 could be levied on you.
prem asked, I want to invest in MF, which is the best option to save tax? My salary is around Rs 2 lac p.a?
Mahesh Padmanabhan answers, Though most of the tax MFs are reasonably good as they come with a lock in period of 3 years, few of the good ones are SBI MF, Principal PNB, HDFC, Pru ICICI etc. However, my sincere advice to you would be to secure your life risk by taking adequate life insurance coverage.
Sudhan asked, I want to know whether the limit under Section 80C of Rs 1 lakh is only for Mutual funds(ELSS) or it's a combination of LIC + Mutal Funds (ELSS) + etc? please clarify!
Mahesh Padmanabhan answers, Section 80C limit is inclusive for all these investments put together.
Sudhan asked, which is safe and better way for saving taxes MF (ELSS) or PPF or NSC?
Mahesh Padmanabhan answers, There are inherent difference in the three investment instruments mentioned by you. While MF (ELSS) could generate dividend income and capital gains, PPF & NSC would generate interest income. The risk factor is higher in case of MF and NIL in terms of PPF & NSCs. Also, the dividend & interest on PPF is exempt from tax while interest on NSC is taxable.
NABIN asked, PF OR NSC WHICH IS BETTER?
Mahesh Padmanabhan answers, PF or PPF is a better option as the returns are tax exempt which is not the case with NSC.
Anil asked, I invested in SBI TAX GAIN in Feb 2007 and since then it is not the best of the funds. Please advise me some good options keeping net 3 years in mind for ELSS?
Mahesh Padmanabhan answers, You need to be patient with ELSS schemes. The key factor is that as the time frame is 3 years, the fund manager has a better leveraging position to manage her/his funds. So my advice would be to hold on as SBI is definitely a good fund.
sundar asked, Hi, is it the right time to invest in MFs? Which one is good MFs or LIC Money plus? Also which MF is good now? Tell me some benefits of investing in PPF?
Mahesh Padmanabhan answers, In case you plan to invest using the SIP (Systematic Investment Plan), you can start investing even now. You definitely need to have a long term focus and remain invested over longer periods to see sustained positive results. I understand LIC Money Plus has been withdrawn w.e.f August 15, 2007. In case you plan to invest in ULIPs then you need to be clear that you are doing so after checking out the total cost of the ULIP in terms of policy charges etc. You would be advised to check with a good financial consultant based on your specific needs.
sundar asked, What is SIP? What does it mean in terms of benefits?
Mahesh Padmanabhan answers, SIP works on the cost averaging concept. The point is you can either put all your investment in MF at one go or alternatively defer the same investment over a period of time. In case of deferring the investment over a period of time frame, you would possibly avoid large losses in case of fall in the stock market but make sustained growth in an increasing stock market.
Mahesh Padmanabhan is principal advisor -- direct taxes group, RelaxWithTax Consultants Pvt Ltd, a Mumbai-based personal taxation and finance solutions provider.