Tax Refund – Smart Ways to Use your Tax Refund

Posted by Mehul Kothari | Published on 14 Jan 2020
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Tax Refund – Smart Ways to Use your Tax Refund

Usually, none of us likes to receive emails from the Income Tax Department. Because they are often regarding the errors in tax filing, deadline reminders, cash outflows and similar. Having said that, there are also times when you receive an email from the Income Tax Department notifying that you have received a refund against your tax filing.

Getting a tax refund can be both exciting as well as stressful. It requires you to carefully think and decide what to do with the unexpected funds. However, before you decide anything, you must remember that this is not the extra cash that you have received from the department; it is your own money that you had overpaid to the government which department is returning you. Therefore, as a part of personal financial management, you need to assess your options for smartly using your tax refund. You may consider doing your money management by either choosing to save it or invest it or use it to pay off your existing debt. While some choices could improve your financial situation, others might push you backwards. Therefore, it is crucial to do good financial planning to make the most of your tax refund. Here are a few smart ways to use your tax refund.

Ways to utilise your tax refund to improve your personal finance

  • Pay-off existing debt

If you are carrying any debt, including a loan or high credit card bill, you can use your income tax refund amount to pay off your existing liabilities. Your first priority should be paying off high-interest rate debts. This will, in turn, help you improve your credit rating. Besides, it will reduce your financial as well as psychological burden of debt.

  • Build up an emergency fund

Contingencies strike us when we least expect them. Even though we cannot prepare ourselves mentally but we can at least prepare ourselves financially. Building an emergency fund offers a safety net that protects you from unforeseen situations such as costly medical expenses, loss of a job, etc.  Typically, your emergency fund should help you cover living expenses for at least three to six months.

 

  • Invest in a retirement plan

Another smart way of doing financial planning and using your refund is to invest in a good retirement plan. You can do this via monthly SIPs and build a huge corpus for the long run. This fund can help you meet your old age expenses.

  • Fund your goals

With good financial planning, you can fund your financial goals with the help of the tax refund amount. It can be a great source to build up your financial portfolio and help you move closer to your goals. This can be done by investing in equity-oriented mutual funds for long-term goals and debt-oriented mutual funds for short term goals.

 

  • Invest in your health

One of the best uses of your tax refund could be to use it towards improving your health. You can use the amount for buying comprehensive annual health check-up or you can invest in a fitness device or take up a gym membership, depending on your interests and abilities.

 

  • Buy life insurance policy

If you are the primary bread earner in the family and your parents, spouse and children are dependent on your income then it is worth investing in a good life insurance plan. With the refund amount, you can consider buying a term policy and pay for it while you need it.

 

  • Invest in stocks and mutual funds

Your tax refund can be an excellent opportunity to begin investing in stocks and mutual funds. Both the investment avenues have great growth potential and are an ideal investment vehicle for a long-term horizon. However, before you invest in stocks and mutual funds, it is advisable to research well and access your risk tolerance, investment horizon and financial goals before taking any decision.

 

  • Start a goal-oriented savings account

It is a good idea to open a savings account with your tax refund keeping a specific goal in mind. It can be buying a new car or home theatre, accumulating funds for your child’s higher education or marriage and similar such expenses. Dedicate the savings account for meeting the expenses related to the goal. Moreover, a dedicated account can help you keep track of your progress towards meeting your goal and prevent you from spending money on unnecessary things.

  • Donate to charity

You can use your tax refund for a good cause by donating it to charity. It is not only a noble cause but also helps you in your tax planning. You can claim a deduction in your tax return for the amount you donate as a charity. Just remember to save the donation receipts for documentation purposes.

 

  • Treat yourself

Once you have covered all the above options, then you may consider spending on your leisure. You may use the refund to sponsor an exotic vacation or buy yourself a smart television or a smartphone you have been waiting to buy. Besides, you may also consider investing in yourself by taking up a skill development course or learning new experiences. Just ensure that you spend keeping your financial planning in the mind.

 

Conclusion

Tax filing can be daunting, so a refund could make you feel rich and inspire you to spend on unnecessary things. You can counter this by using your tax refund amount in the above-mentioned ways and increase your financial security. You must consider your income tax refund as an opportunity to better plan your personal finance. So, next time you get a tax refund, consider doing money management by using the refund amount to your financial advantage.




Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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Tax Saving Investments - 5 Income Tax Saving Schemes Other Than Sec 80C

Posted by Mehul Kothari | Published on 14 Jan 2020

The taxpayers are always in search of ways through which they can save their taxes. The most popular section for saving taxes among the taxpayers is section 80C. You can claim deduction up to Rs. 1,50,000 under section 80C of the Income Tax Act, 1961 by investing in specified avenues listed by the government. However, there are many other sections under which you can save your taxes but due to lack of awareness, many people miss out on them. In this article, we will list down five income tax saving schemes other than section 80C. Tax Saving Schemes Other Than 80C National Pension System (NPS) National Pension System (NPS) is one of the popular tax saving investment schemes. Here you can invest in the NPS and get an additional tax deduction up to Rs. 50,000. This scheme was launched by the government of India in 2009. This tax saving scheme makes you eligible for an additional tax deduction for investment up to Rs 50,000 under subsection 80CCD (1B) of the Income Tax Act, 1961. The main advantage of investing in NPS is that the tax benefits under this scheme are not clubbed with the tax benefits under section 80C which allows tax benefits on investments of up to Rs. 1,50,000 lakhs only. Investment in NPS can be done by employees of the public, private and unorganized sectors. Apart from saving tax, NPS is also a good investment scheme for the long term. Health Insurance Premium The health insurance premium is another good tax saving investment option. Paying health insurance premiums can help in saving your taxes. You can claim deduction under section 80D of the Income Tax Act, 1961. The maximum exemption limit under this section is up to Rs. 1,00,000. The exemption limit is up to Rs. 25,000 for health insurance premium paid for self, spouse or dependent children. However, when the premium is paid for the health insurance of senior citizen parents, the maximum deduction limit is Rs. 50,000. Therefore, when the health insurance premium is paid for policies for self, spouse and senior citizen parents, the total deduction that can be availed is Rs. 25,000 plus Rs 50,000 i.e. Rs 75,000. A mediclaim policy is essential these days because if any of your family members fall sick or meets an accident, the cost of treatment can wipe out a large part of your savings. The deduction under this section can be claimed only when the premium is paid by any mode other than cash. Also, the central government or the Insurance Regulatory and Development Authority of India (IRDAI) must have approved the insurer. Payment Of Interest On Education Loan Education loans are one of the popular tax saving investments. The tax deduction is available to you on the interest paid on the education loan taken for self, spouse, children, or a student (whose legal guardian is you). The tax deduction on payment of interest on education loan is available under section 80E of the Income Tax Act, 1961. What makes it a good tax saving scheme is the fact that interest paid on education loan is eligible for deduction without any limit. However, to claim deduction under section 80E, you must make sure that the loan is taken for higher education i.e. for any course after the completion of the 12th standard. The deduction on interest is available for a period of eight years from the year in which the payment of interest started. Savings Account Interest Interest in the savings account is eligible for tax exemption. The tax exemption limit on the interest of the bank’s savings account is Rs. 10,000. Therefore, if the interest income from the bank’s savings account is more than Rs. 10,000 then you have to pay tax on it. However, you must remember that the interest on fixed deposits in the bank is not eligible for tax exemption. Donations Donations made to institutions or organisations that are notified by the Central Government of India are eligible for tax exemption. Such deduction is available under section 80G of the Income Tax Act, 1961. However, while availing this income tax saving scheme, the amount donated must not exceed 10 per cent of the adjusted gross total income. Under this tax saving scheme, the donation of more than Rs. 2,000 in cash in not eligible for a tax deduction. Some of the funds that are notified by the government include Swachh Bharat Kosh, Clean Ganga Fund, Prime Minister's Drought Relief Fund, Prime Minister's National Relief Fund, National Children Fund, National Defence Fund, Jawaharlal Nehru Memorial Fund, etc. In addition to the notified institutions, deduction under section 80G is also available on donations given to churches, temples and mosques for renovation purposes. Such churches, temples and mosques must be approved by the Central Government.   The above mentioned are some of the popular tax saving funds other than section 80C. It is always advisable to invest in multiple funds to avail the tax deductions. This is because there is a cap of Rs. 1,50,000 lakhs for tax deduction under section 80C. By investing in the other income tax savings schemes, you can avail the deduction of more than Rs. 1,50,000. By exploring other tax saving investment options, you can further reduce your tax liability. If you want to learn more about tax saving funds or need any financial advice, you can contact IndiaNivesh. We are one of the leading broking and financial advisory firm in India with highly qualified professionals who can help you in reducing your tax liability.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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Tax Saving FD – Know About Tax Saving Fixed Deposit

Posted by Mehul Kothari | Published on 14 Jan 2020

Every salaried individual as well as a business person is required to pay taxes as per the income tax laws. While paying taxes, we all aim to legally save it in some way or the other. But how do we do that? It is the most confusing question for most of the taxpayers. One of the excellent ways of saving taxes is by investing in tax-saving investment schemes. They not only help you save taxes but are also instrumental in effectively achieving your financial goals. There are many investment avenues available in the market that either offer tax exemption or tax deduction. Having said that, selecting the most suitable and right tax-saving investments may not come easy for everyone. While choosing the right scheme, one needs to access several factors such as safety, returns and liquidity, among other things. A very popular tax-saving investment option among taxpayers is investments under section 80C. As per section 80C of the Income Tax Act, 1961, investments of up to Rs. 1.5 lakhs can be claimed as a deduction. Tax saving fixed deposit is a type of fixed deposit where you can get a deduction of maximum Rs. 1.5 lakhs under section 80C. To arrive at the net taxable income, the amount invested in tax saving FD is to be deducted from gross total income. Let us learn about some of the important points that you must consider before investing in tax saving FD. Things to Know About Tax Saving Fixed Deposit Investment in tax saving FD can be done by individuals and Hindu Undivided Family (HUF) only. The minimum amount for fixed deposits varies from bank to bank. Income tax saving FD has a lock-in period of 5 years. You cannot make premature withdrawals and loans against these FDs. Investment in these FDs can be made only through private or public sector banks. Rural and co-operative banks are not eligible for these FDs. Tax-saving fixed deposits can be held in ‘singly' or 'jointly'. When the holding is in joint mode, the tax benefit is available to the first holder. Tax saving FD interest rates vary from bank to bank. The interest rate ranges from 5.5% – 7.75%. However, note that some banks offer higher rates on FDs to the senior citizens. These fixed deposits have nomination facilities. The interest earned on the income tax saving FD is taxable according to the investor’s tax bracket. The interest on tax saving FD is payable on a monthly or quarterly basis. The main advantage of investing in tax saving fixed deposits is that they are less risky in comparison to equities. Since many banks offer this type of FD, let us learn about its details. Banks and Income Tax Saving FDs SBI Tax Saving FD Tax saving FD interest rates of SBI is 6.25% for general customers and 6.75% for senior citizens. The maximum deposit in a year is Rs. 1 lakh and the minimum deposit is Rs. 1,000. By using a tax saving FD calculator you can know the amount receivable after the lock-in period of 5 years depending on the maturity period of your FD.   HDFC Bank Tax Saving FD Tax saving FD in the HDFC Bank can be opened with a minimum amount of Rs. 100. The maturity period of this FD is 10 years. Tax saving FD interest rates is 6.30%. Senior citizens get an added benefit of 50 basis points over general customers.   ICICI Bank Tax Saving FD The interest rate on tax saving fixed deposits at the ICICI Bank to the general customers is 6.6% and for senior citizens, the interest rate is 7.10%. These rates are applicable to FDs having a maturity period of 5 to 10 years. The maximum amount that can be deposited is Rs. 1.5 lakhs and the minimum amount for opening tax saving FD at the ICICI Bank is Rs. 10,000.   PNB Tax Saving FD Punjab National Bank offers an interest rate of 6.30% on a five-year tax saving FD. The minimum amount for opening tax saving FD at the PNB Bank is Rs. 5,000.   Bank of Baroda Tax Saving FD Bank of Baroda offers an interest rate of 6.30% on a five-year tax saving FD.   The Bottom Line The above mentioned are the basic details about the major banks that offer income tax saving FDs. You may access each individual option carefully and select the suitable one after doing good research. You can find all the basic information on the bank’s website. If you want to find out the returns that you will be earning from the fixed deposit, you can access the tax saving FD calculator and find out the returns by entering your fixed deposit details. If you want to learn more about income tax saving FD or want to learn about other investment options, you can contact IndiaNivesh. We are among one of the most trusted and value-enhancing financial groups in India.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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  • IPO Process - 5 Steps for Successful Listing in India
    Posted by Mehul Kothari | Published on 14 Jan 2020

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Apart from the company, investors can also reap the benefits of an IPO by investing in them. Since there are many risks and uncertainties associated with a company going public, good research before investment can be fruitful. The investors can compare the company with its peers and check its fundamentals before investing. An investor must also consider his risk appetite and availability of funds before investing money in the IPOs. If you are an investor and need any assistance regarding investing in the stock market, you can contact IndiaNivesh.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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    Posted by Mehul Kothari | Published on 14 Jan 2020

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  • Tax Saving FD – Know About Tax Saving Fixed Deposit
    Posted by Mehul Kothari | Published on 14 Jan 2020

    Every salaried individual as well as a business person is required to pay taxes as per the income tax laws. While paying taxes, we all aim to legally save it in some way or the other. But how do we do that? It is the most confusing question for most of the taxpayers. One of the excellent ways of saving taxes is by investing in tax-saving investment schemes. They not only help you save taxes but are also instrumental in effectively achieving your financial goals. There are many investment avenues available in the market that either offer tax exemption or tax deduction. Having said that, selecting the most suitable and right tax-saving investments may not come easy for everyone. While choosing the right scheme, one needs to access several factors such as safety, returns and liquidity, among other things. A very popular tax-saving investment option among taxpayers is investments under section 80C. As per section 80C of the Income Tax Act, 1961, investments of up to Rs. 1.5 lakhs can be claimed as a deduction. Tax saving fixed deposit is a type of fixed deposit where you can get a deduction of maximum Rs. 1.5 lakhs under section 80C. To arrive at the net taxable income, the amount invested in tax saving FD is to be deducted from gross total income. Let us learn about some of the important points that you must consider before investing in tax saving FD. Things to Know About Tax Saving Fixed Deposit Investment in tax saving FD can be done by individuals and Hindu Undivided Family (HUF) only. The minimum amount for fixed deposits varies from bank to bank. Income tax saving FD has a lock-in period of 5 years. You cannot make premature withdrawals and loans against these FDs. Investment in these FDs can be made only through private or public sector banks. Rural and co-operative banks are not eligible for these FDs. Tax-saving fixed deposits can be held in ‘singly' or 'jointly'. When the holding is in joint mode, the tax benefit is available to the first holder. Tax saving FD interest rates vary from bank to bank. The interest rate ranges from 5.5% – 7.75%. However, note that some banks offer higher rates on FDs to the senior citizens. These fixed deposits have nomination facilities. The interest earned on the income tax saving FD is taxable according to the investor’s tax bracket. The interest on tax saving FD is payable on a monthly or quarterly basis. The main advantage of investing in tax saving fixed deposits is that they are less risky in comparison to equities. Since many banks offer this type of FD, let us learn about its details. Banks and Income Tax Saving FDs SBI Tax Saving FD Tax saving FD interest rates of SBI is 6.25% for general customers and 6.75% for senior citizens. The maximum deposit in a year is Rs. 1 lakh and the minimum deposit is Rs. 1,000. By using a tax saving FD calculator you can know the amount receivable after the lock-in period of 5 years depending on the maturity period of your FD.   HDFC Bank Tax Saving FD Tax saving FD in the HDFC Bank can be opened with a minimum amount of Rs. 100. The maturity period of this FD is 10 years. Tax saving FD interest rates is 6.30%. Senior citizens get an added benefit of 50 basis points over general customers.   ICICI Bank Tax Saving FD The interest rate on tax saving fixed deposits at the ICICI Bank to the general customers is 6.6% and for senior citizens, the interest rate is 7.10%. These rates are applicable to FDs having a maturity period of 5 to 10 years. The maximum amount that can be deposited is Rs. 1.5 lakhs and the minimum amount for opening tax saving FD at the ICICI Bank is Rs. 10,000.   PNB Tax Saving FD Punjab National Bank offers an interest rate of 6.30% on a five-year tax saving FD. The minimum amount for opening tax saving FD at the PNB Bank is Rs. 5,000.   Bank of Baroda Tax Saving FD Bank of Baroda offers an interest rate of 6.30% on a five-year tax saving FD.   The Bottom Line The above mentioned are the basic details about the major banks that offer income tax saving FDs. You may access each individual option carefully and select the suitable one after doing good research. You can find all the basic information on the bank’s website. If you want to find out the returns that you will be earning from the fixed deposit, you can access the tax saving FD calculator and find out the returns by entering your fixed deposit details. If you want to learn more about income tax saving FD or want to learn about other investment options, you can contact IndiaNivesh. We are among one of the most trusted and value-enhancing financial groups in India.Disclaimer: "Investment in securities market and Mutual Funds are subject to market risks, read all the related documents carefully before investing."

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