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4 smart tax moves to maximize investment returns
May, 11th 2022

Benjamin Franklin had rightly said – “In life, only two things are certain: death and taxes.” The first one cannot be avoided, but we can make an effort to reduce the tax burden and increase investment returns.

 

This is the first and foremost smart move that one can make to maximize returns on one’s investment. 

Anup Bansal, Chief Investment Officer, Scripbox, says, “Tax planning is a crucial aspect when it comes to saving on returns. If you are planning to make investments in tax-saving instruments like PPF and ELSS, it is best to do it at the beginning of the year to give more time for growth.” 

If there are changes in your situation, such as rental agreement changes (HRA), then consider these and intimate your employer for accurate TDS.

Invest in the name of your parents and spouse 

To avoid income clubbing, you can try investing in the name of your parents, or even your grandparents and spouse who may be in a lower tax bracket. 

Bansal explains, “If one of your parents is over the age of 65 and does not have any investments, you can invest in their name to earn tax-free interest. Every adult over the age of 60 is already entitled to a Rs 3 lakh baseline exemption.”  

Additionally, if you wish to take the help of a grandparent, who is above the age of 80, the exemption is even higher at Rs 5 lakh. 

Invest in the name of your kids

Next, your kids can also help you save tax, much like your parents, but only if your kid is an adult, i.e. above the age of 18. 

After becoming an adult, a kid is treated as a separate individual, for tax purposes and would even be eligible to open a Demat account and invest in stocks and mutual funds, with money gifted by you. 

“Long-term capital gains of up to Rs 1 lakh will be tax-free every year, while short-term capital gains would be tax-free up to the standard exemption of Rs 2.5 lakh per year,” points out Bansal. 

NPS is a good option

With the low annuity rates in India and the scary thought of putting away your retirement money for a long time, experts say has led to NPS being considered an unattractive investment option. 

Having said that, Bansal adds, “reform in the NPS’s withdrawal regulations has reversed this to some extent, making the pension scheme more appealing to those in their 50s. The new rule opens a few different tax-saving options for investors.” 

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