So you had an LIC endowment policy which you have surrendered and are now wondering if you have to pay any tax on the same or not.
Or, you have a pension plan from ICICI Pru, HDFC Life and others which was not making money for you. You were naive then to buy into it but not any more. Better to put it in a more rewarding investment.
But do you know, what is your tax liability on the same?
I filed my Income Tax Return for FY 2017.
The online e-filing system of the Income Tax Department has only become more convenient. Like last year, I used it this time too for filing my income tax return.
It took me less than half an hour to do it. This is how I went about it.
Long Term capital gains tax is in the news. Apparently, there were some rumours which possibly also led the markets downhill.
For those not so familiar with the subject, here’s a quick primer and update on capital gains tax.
Let’s first understand what is a capital gain.
A capital gain is a realised profit on sale of assets such as land, building, precious metals (gold), stocks, mutual funds, etc. Note, the gain has to be realised after sale of asset.
As per the current status of tax laws in India, this is how capital gains tax is charged.
Einstein famously said that there are only two certainties in life – Death and Taxes. Both are scary. As for taxes, you don’t even want to talk about them, lest even pay them. Well, you need not be so scared. A little knowledge can go a long way in reducing your fear as well as … Read more
The doorbell rang. It was Vijay, my friend. We were meeting after a long time to play our favourite game of chess.
“Vijay, I am about to finish filing my income tax return for this year. Give me a few minutes.” I request him.
“Sure. Take your time.”
He engaged himself with laying down the pieces on chess board for the game.
I finished filing the tax return, came back and sat next to him on the sofa.
“Done?”
“Yes.” I said with a feeling of great satisfaction. “Have you filed yours?” I asked inquisitively.
“No, no. I haven’t filed my income tax returns in the last 3 years.” He said as a matter of fact.
I was surprised. “Really! But why?”
“It is simple. The company where I work deducts TDS on the salary I get. There is no more tax that I have to pay. What is the need to file tax return?”
“Save taxes with mutual funds?”, my friend Ajay had a look of curiosity on his face as he heard this. “How is it possible?”
“Yes, it is. There are mutual fund schemes specifically created for this purpose. They are known as Equity Linked Savings Schemes or ELSS or Tax saving mutual funds.
I am sure you are aware that under Section 80C of the Income Tax Act, you can invest upto Rs. 1.5 lacs in various eligible investment options and claim deduction of income tax. Simply put, when you invest in those specified options you do not have to pay any tax on that portion of the income.
ELSS funds are eligible for such investment.” I took a pause.
“So these ELSS funds invest in stocks?” Ajay was excited.
“Yes, these funds invest most of their monies in stocks.”
Ajay looked happy. “Isn’t that a wonderful combination – save taxes as well as get benefit of equity investing?”
I nodded in agreement and said, “The popular idiom to describe such a benefit is to kill two birds with one stone. In Hindi, that would be ek teer se do shikaar.”
“Are there any restrictions that apply to this investment?” he enquired further.