SIP Investment People can invest whenever they want throughout the year, whether it’s for placing extra funds in the market or for saving taxes. However, an issue arises when the employees are told to provide their plans for tax-saving several months before the end of the economic year. When you make an investment at the last moment, it may lead to many risks, such as choosing an incorrect product to fund, which does not provide you with the outcomes you need. That’s why it is always better to invest to save tax with the help of SIP and achieve the outcomes that you desire.
SIP Investment: How Does It Aid in Tax-Saving?
You take out a fair share of your income for investments, reducing your savings. To prevent this, you can opt for SIP investments as they are viewed as an ideal option through which you can save on tax and receive much higher returns.
Through SIP investments in Equity Linked Savings Schemes (ELSS), you can avail a tax deduction of up to Rs. 1,50,000 from your taxable income as per Section 80C of the Income Tax Act, 1961. This deduction applies to the total investment made in ELSS within a financial year. If you fall under the 30% tax slab, you can save approximately Rs. 46,800 in taxes annually.
Conducting your tax-planning work with SIP investment during the early stages will help you plan out the monthly fund balance in a proper manner. Furthermore, you can also use the “SIP Calculator,” which will let you know about the earnings, total investment amount, and the overall maturity amount on your investment.
How to Save Tax via SIP Investment in ELSS?
Although ELSS carries a reputation for being an outstanding scheme to save tax, it also ensures that individuals receive much higher returns on their investments. Apart from that, ELSS is known for its low charges and high liquidity and will provide you with excellent returns when compared to other investment tools available in the market.
Also, when you compare ELSS with other investment schemes, such as the “5-year FDs” and “PPF,”, you will find that ELSS will not just offer you higher returns, but it also comes with a lock-in period of 3 years. By investing just Rs. 500 every month, you can begin the SIP investment within the ELSS mutual funds.
Who is Suitable to Save Tax via SIP Investment?
There are investors who are suitable to save up on taxes through the SIP investment:
- Ambitious Individuals: Tax-saving SIPs are an option for those who want to save money for particular goals such as marriage, children's education, retirement planning, or buying a house. They would be able to save money on taxes and focus on their ambitions hassle-free.
- Young Professionals: All individuals who have just started out in their careers can save up on taxes via SIP investments. Doing so will help them construct a powerful financial foundation. It’s advised that you should begin with the investment work early as it will let you compound and accumulate the wealth over time.
- Salaried People: All active professionals who have stable earnings will surely profit from the tax-saving SIP choice. This is because the option will deliver them with a periodic investment so that they can assign a fraction of their earnings towards a mutual fund plan, such as ELSS, without encountering any monetary issues. With the help of this method, all salaried individuals can lessen their tax disadvantages.
How Will You Benefit from SIP Investment to Save Tax?
Opting for SIP investment to save up on taxes can provide you with many benefits, and some of them are listed below:
- Provides Convenience: Through SIP investment, you can pick any mutual fund and then start investing in it with an amount as low as Rs. 500.
- Disciplined Investing: Through SIP investment, you will get the chance to embrace a long-term and disciplined funding ideology, which will let you witness monetary stability and growth.
- Compounding: Through SIP investments, you can choose to start investing early as it will help you magnify all the returns over the time period.
- Rupee Cost Averaging: You don’t have to time the stock market. Rupee Cost Averaging helps investors by lowering the average purchase cost over time, mitigating the effects of market fluctuations, and potentially increasing returns.
How to Invest in SIP?
When you have decided to opt for SIP investment to save up on tax, you can follow the steps listed and start investing in SIP through ICICI Bank mobile platforms:
- Download the iMobile Pay app from Play store or App store and log in to your account using your ID and password.
- Get to the “Invest & Insure” section, and select “Mutual Funds”.
- Now, select from the listed Mutual Funds in which you wish to invest as per your financial goals.
- Based on the selected funds, decide on the amount you wish to invest regularly. This amount will be auto-debited from your bank account on a recurring basis, helping you build a disciplined investment habit.
- Choose a convenient date for the SIP amount to be auto-debited from your account each month. This date should align with your financial planning to ensure sufficient balance for the investment.
- Complete the online registration by filling in all required details and making the initial payment. This final step activates your SIP, setting you on the path to wealth accumulation.
You should choose suitable mutual funds based on your risk taking preference and financial goals to maximise the benefits of your investments.
Conclusion
When you opt for SIP investments, it will not just help you save taxes but also help you manage your finances effectively. It will reduce the chances of missing out on payments as it allows for better cash flow management by spreading investments over time, which can help align with other periodic payments. To receive much higher returns, save taxes, and achieve the desired outcomes, you should start investing in SIP a bit early.
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