Home News Modes Of Tips Mutual Funds About Us Contact Us Packages Disclaimer Foreign investors

New Tax-Saving Rules for 2006

You have until March 31, 2006 to invest in income tax-saving schemes to lower your tax liability for the current financial year. But it's worth thinking about such matters now, especially since the rules have been changed. Indeed, thanks to these changes, the same income attracts less tax this year than in '04-05.
As in the past, you can save tax by investing in schemes such as the Public Provident Fund, life insurance, National Savings Certificates (NSC), infrastructure bonds and equity-linked tax-saving schemes of mutual funds (ELSS). But now everyone benefits from these schemes; earlier only those with a taxable income under Rs5 lakhs did so. 
The investment limits for infrastructure bonds and ELSS have also been substantially raised. You can now invest upto Rs1 lakh in either scheme. With ELSS this can make a lot of difference because the returns you get from investing in such schemes (but not, of course, the tax benefit) could be much greater than from other options such as PPF, NSC or infrastructure bonds.
Finally, taxmen no longer insist that the money you invest in these schemes be earned during this financial year-you can use money that you've earned in the past too.

 - Percy Poonegar

ELSS: Old May Be Gold

As a group, equity-linked tax-saving schemes of mutual funds (ELSS) have given an overall 78% return over the last 12 months, with the three best-performing schemes gaining between 111 and 151%. Experts cite two reasons for this: a rapidly rising stock market; and a three-year lock-in period, which enables better management. Fund officials can ignore short-term fluctuations and plan for the longer term-always advisable with equities. As March approaches, you'll see several new schemes being launched. Should you opt for one of them? Nobody can predict how a new scheme will perform. So it's probably wiser to choose an already established scheme with a good track record. However, there's no guarantee that future returns will be as good. 

 - M.S.

Click here for Indian stock market tips