I think I pay more taxes than anybody else in this country.” Param’s tone had frustration. He was looking at his salary slip for March.
Ajeet, who was in the next cubicle, heard this.
“Ki gal hai paaji? (What happened Sir?)” he stood up and looked at Param.
“See (showing the salary slip to him). I have got Rs. 10,000 only as salary this month. Rs. 50,000 has been quietly donated from my salary as taxes. How do these guys expect me to run my home in Rs. 10,000? And why am I paying so much tax?” The frustration in the voice had gone up.
“Did you do tax planning?”
“What are you talking? Do I have to even plan for paying taxes?”
“Sorry, I meant did you plan for saving on taxes?”
“Ajeet, I have an EPF account, insurance policy, PPF. What else should I do?”
“How much do you save in all of them put together?”
“What about the remaining Rs. 75,000? You know that you can save up to Rs. 1.5 lakhs under Section 80C, right?”
“Seriously! That means you can easily save another Rs. 15 to 20k in taxes.”
“Oh man! Why didn’t you tell me before?”
“You didn’t ask.” Ajeet shrugged.
“OK, I am asking now. Tell me what to do to save this tax.”
Ajeet pulled a chair besides Param. “So, based on what you told me, I think you are not using the tax saving mutual fund i.e. Equity Linked Savings Scheme or ELSS funds."
“I have no idea, Ajeet. Haven’t been investing in mutual funds. You got to take me through this step by step.”
“See, it is quite simple. When you invest in a tax saving mutual fund, you invest in a specific mutual fund that allows you to claim a deduction for tax savings. Much as you do for your PPF, EPF, etc. You can show your tax saving mutual fund investment too for income tax deduction under section 80C and save tax.”
“But why should I do it? I can just increase my PPF.”
“Fair enough, you can do it. But based on what you said, you don’t invest in mutual funds or stocks. How are you planning to grow your money to beat mehengai (inflation)?
By doing only PPF or EPF*, you are more likely running on a treadmill. You are running constantly but reaching nowhere. Equity allows you to go further with your wealth.”
"Got it. And ELSS fund is one of the ways to invest in equities?” Param added.
“That’s right. You not only save taxes but also get the power of equity working for you to beat inflation and grow your wealth.”
“I think this makes sense to me. Now tell me, how to invest in this tax saving mutual fund?”
"See, the new financial year is starting. Instead of being caught by surprise again later in the year, it is best that you start a regular investment via SIP or Systematic investment Plan."
“Oh, is it not the SIP ad that is running these days, some #MutualFundsSahiHai thing.”
“Yes, that’s right.”
“OK, so where can I start this SIP?”
"This is simple too. You can do it online – every mutual fund house has their own website through which one can invest in the respective schemes offered by them. Apart from that, there are several third-party online portals, from where you can invest in various mutual fund schemes across AMCs. Or you could start it offline with help of a mutual fund distributor."
“Awesome, my friend, you have been a great help! Let me now kick the tax bill out of the window.” Param literally does the action.
*Unlike EPF/PPF, investments in Mutual Fund are subject to market risks.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.