Income Tax alert: Money making strategy in ELSS, PPF, Sukanya Samriddhi Yojana, other tax-saving plans

Income Tax alert: The Income Tax Department of India has released its income tax return (ITR) filing calendar and an earning individual is advised to keep the important tax-related dates in mind to avoid any kind of penalty in regard to delay in ITR filing. This ITR calendar would also help an earning individual to have an assessment income tax liability through the income tax calculator. Once income tax AY2019-20 filing is done, there is enough time to avoid income tax liability through investments in tax saving plans. Most popular tax saving plans for taxpayers are ELSS mutual funds, Public Provident Fund (PPF), Sukanya Samriddhi Yojana, if one has a girl child below 10 years of age, NPS or National Pension Scheme, NSC or National Savings Certificate and other small savings scheme.

Speaking on the tax-saving plans Pankaj Mathpal, MD at Optima Money said, "When it comes to tax-saving investment plans ELSS Mutual Funds, PPF, NPS, Sukanya Samriddhi Yojana (those who have girl child below 10 years of age), NPS and NSC is the most preferred choice among the earning individuals. However, in my opinion, except the ELSS Mutual Funds scheme, all other tax saving plans are debt schemes with limited returns. If someone has a long-term perspective say 15 years or more, then I would advise the taxpayer to go for the ELSS Mutual Funds because in the last 3 years ELSS Mutual Funds have given more than 13 per cent returns while in the last five years, ELSS Mutual Fund returns have been to the tune of near 18 per cent (in fact more than 18 per cent)." 

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However, Mathpal pressed for the diversified portfolio citing, "ELSS Mutual Funds have given higher returns doesn't mean people should invest their entire fund in the equity-linked saving schemes only. Some fund allocation in the debt-funds are necessary and hence if someone has a girl child below 10 years, they must invest in Sukanya Samriddhi Yojana and after that, I would advise an investor to pump money in NPS. PPF is my last choice among the tax-saving plans."

Kartik Jhaveri, Director — Wealth Management at Transcend Consultants said, "It's better to invest in ELSS Mutual Funds than to invest in PPF as both are investments for long-term. Since one should have a diversified portfolio, I would advise investors to choose ELSS first, then NPS with 50:50 ratio in equity and debt accounts. Then after, if the investor has a girl child then he or she should first choose Sukanya Samriddhi Yojana and in the last he or she should go for the PPF."

Mathpal said that one should allocate around 50 per cent of the portfolio in ELSS Mutual Funds, near 20 per cent each in NPS and Sukanya Samriddhi and rest in PPF.