People come up with several excuses to evade tax payment to the government. But there is one such method, which brings forth a win-win situation for every person and motivates them to pay taxes. The method is an investment in tax saving mutual funds. By investing in mutual funds the money not just increases manifolds, but it also provides other benefits as well. Among these benefits, the tax saving option entices people to make the investment in varying mutual fund offering tax saving schemes.
The financial experts often make people aware of the investment benefits in mutual funds. Tax saving options under mutual funds give an incentive to novice people to invest in mutual funds. Investing in mutual funds can help to save tax to a great extent. You might think that it is a bait to manipulate your mind and make you invest in mutual funds. But, if this has crossed your mind then wait and read three success stories given in this article to be confident about your investment plan.
3 Tax Saving Mutual fund Success Stories
#1. Tremors that didn’t uproot the confidence in tax saving mutual funds
Mr Uma Shanker, a 42-year-old working professional in PSU has been investing in ELSS via SIP since 2005. The initial investment amount with which he started his investment plan was Rs.500. Being a novice in the mutual fund SIPs, he hired a professional financial advisor who guided him through the investment plans.
Once he started gaining confidence in mutual funds and raised his investment amount, equal to his PF deduction amount, then the financial market crisis made him doubtful about his decision to invest any further with the tax saving mutual funds. The financial market crashed, which had sent tremors among investors around the world. Due to this meltdown, 50% of his profit vanished, which made him sceptical about the future prospect of his investment plan.
He wanted a foreclosure of his SIP plan, as the losses kept on increasing during the financial meltdown. But, his advisor settled his discomfort with the continuation of the investment plan. He made him realize that the financial market is totally unpredictable. To achieve the long term goals, he should be reluctant about short term instability in the market. This piece of advice made him stick to his plans and wait for the market to gain stability.
With little hope and understanding of the financial market, he kept on with his investment plan. By 2014, his investment has accumulated into a considerable corpus amount. By that time he had also started to invest in NPS. His investment plan has also helped him to save tax as he claimed for the tax deduction by Rs.1.5 lakh in three year lock-in period, which is applicable under section 80C for investments in ELSS.
Besides this, investment in NPS qualifies the investor to get an exclusive tax deduction of about Rs.50,000 under section 80CCD(1B). So, along with higher returns and great corpus accumulation, Mr Shankar saved taxes and reinvested it in SIPs, which is the best step to take on savings.
#2. Instilling money and portfolio management
Mr Partha Paul started with a SIP of Rs.1500 per month. But, the things weren’t under his favour so the returns reported were negative on his investment plan. Then he called up his agent and shifted his investment to other SIPs. But, his agent advice didn’t bear fruit to him.
After investing his time and effort, he became a direct investor. He kept on investing in different tax saving funds. By 2015, the number of funds that he had held by that time doubled in worth. His invested money resulted in a huge corpus. His investment plan helped him to save Rs.46,800 per annum in a three year lock-in period plan. The tax deduction is provided on the basis of the highest tax slab under which his return and income fall.
#3. Achieving the financial goal while saving tax per year
When Mr Suresh started investing in tax saving mutual funds, he had the least idea about the tax-saving option attached with the investment plan. He started investing in SIP with Rs.2000 per month. But, his investment portfolio turned neutral with 0% return in the first three years of investment. He shuddered at the thought of getting negative returns and had been planning to put a halt to his investment scheme.
Mr Suresh’s financial advisor instilled confidence in him and made him invest in other SIPs. His generous piece of advice turned his life and after 2 years, the investment started to pay returns. As his salary increased, he increased his SIP to Rs.60,000 per month in those plans whose PE dropped below 18. For 20 years, he kept on with this investment plan and accumulated Rs.1,44 crore (60,000 x 12 months x 20 years). By December 2013, his target investment was achieved and now he wanted the market to achieve his target. Then, onwards, he lowered his debt allocation from 70 % to 58%. He started to gain profits and by 2021 he targets to get Rs.7-8 crore through his investment plan.
His investment has not just increased manifold but has also helped him to save tax year by year. Every year he has saved lump-sum Rs.47,000 amount as a tax deduction on his investment plan.
The success stories of tax saving not just instils incentive to gain profit through investment in SIPs but also to file for tax. Both of these steps help the investor to gain in the long run. The only thing that has to be kept in mind is that mutual funds require patience, time and intellectual money management plans.