mutual-fund-insight - Mar 2021_Neat

basic exemptions and deductions – `1.5 are many avenues to spend and with
lakh under Section 80C, `50,000 under the new tax slabs, one major saving ave-
Section 80CCD(1B) and `25,000 under nue will be gone.
Section 80D, apart from the default
standard deduction of `50,000 – you can Know your equilibrium point
pay less tax than that in the new sys- Everyone will have their own set of
tem. Of course, if you include other deductions and exemptions. Hence, we
exemptions and deductions, such as have worked out equilibrium points for
house-rent allowance, you could be pay- various income groups (see the chart
ing even less tax. ‘The equilibrium points’). These repre-
The second cost is that if you follow sent the amount of deduction that
the new tax slabs, you may compromise brings the old and new tax structure at
on savings. No matter if tax-planning is par in terms of the tax payable. Any
pesky for some of us, it forces us to further deductions from these equilibri-
save. If not forced to, many of us don’t um points will make the old system
save enough. This can result in finan- beneficial as your tax outgo would
cial complications in the future, includ- reduce. If your tax-admissible expenses
ing during retirement. For the young and investments (not just 80C and 80D
generation especially, the new tax slabs ones but also your HRA, donations
can result in higher spending and less under Section 80G, etc.) are more than
saving. With rising consumerism, there the given equilibrium level, you can
New vs old: Which is more beneficial?

If basic exemptions and deductions are claimed (as stated in the footnote of this table), the existing
tax system beats the new one hands down.
Taxable income Tax payable
Income Deductions* Old regime New regime Old regime New regime Gain/Loss
7,50,000 2,75,000 4,75,000 7,50,000 0 39,000 -39,000
10,00,000 2,75,000 7,25,000 10,00,000 59,800 78,000 -18,200
12,50,000 2,75,000 9,75,000 12,50,000 1,11,800 1,30,000 -18,200
15,00,000 2,75,000 12,25,000 15,00,000 1,87,200 1,95,000 -7,800
17,50,000 2,75,000 14,75,000 17,50,000 2,65,200 2,73,000 -7,800
20,00,000 2,75,000 17,25,000 20,00,000 3,43,200 3,51,000 -7,800
22,50,000 2,75,000 19,75,000 22,50,000 4,21,200 4,29,000 -7,800
25,00,000 2,75,000 22,25,000 25,00,000 4,99,200 5,07,000 -7,800
27,50,000 2,75,000 24,75,000 27,50,000 5,77,200 5,85,000 -7,800
30,00,000 2,75,000 27,25,000 30,00,000 6,55,200 6,63,000 -7,800
32,50,000 2,75,000 29,75,000 32,50,000 7,33,200 7,41,000 -7,800
35,00,000 2,75,000 32,25,000 35,00,000 8,11,200 8,19,000 -7,800
37,50,000 2,75,000 34,75,000 37,50,000 8,89,200 8,97,000 -7,800
40,00,000 2,75,000 37,25,000 40,00,000 9,67,200 9,75,000 -7,800
42,50,000 2,75,000 39,75,000 42,50,000 10,45,200 10,53,000 -7,800
45,00,000 2,75,000 42,25,000 45,00,000 11,23,200 11,31,000 -7,800
47,50,000 2,75,000 44,75,000 47,50,000 12,01,200 12,09,000 -7,800
50,00,000 2,75,000 47,25,000 50,00,000 12,79,200 12,87,000 -7,800
1,00,00,000 2,75,000 97,25,000 1,00,00,000 31,23,120 31,31,700 -8,580
2,00,00,000 2,75,000 1,97,25,000 2,00,00,000 68,53,080 68,62,050 -8,970

All numbers in ` *We have assumed the following deductions: Standard deduction of `50,000; `1.5 lakh under Section 80C, `50,000 on
investment in NPS under Section 80CCD(1B); `25,000 on payment of health insurance premium under Secion 80D.

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The equilibrium points stay with the old tax structure.
Otherwise, the new one’s for you.
If you claim the deductions mentioned across
various incomes, your tax outgo in the old and
new tax systems will be the same. To save tax Sections 80C and 80D
in the old system, go beyond your equilibrium If you decide to stay with the old tax
point. slabs, you will need to make various
tax-saving investments. Once you have
6.00 lakh 50,000
ascertained your tax liability, you can
6.50 lakh 75,000
avail of the tax deductions and exemp-
7.00 lakh 1,00,000 tions under Sections 80C and 80D of the
7.50 lakh 1,25,000 Income Tax Act.
Under Section 80C, you can save tax
8.00 lakh 1,37,500
on a maximum of `1.5 lakh. There are
8.50 lakh 1,50,000
a host of avenues under this section,
9.00 lakh 1,62,500 including life insurance, tax-saving
9.50 lakh 1,75,000 funds, NPS, PPF, EPF, tax-saving FDs,
10.00 lakh 1,87,500 etc. You can find many of them in the
previous section ‘Compendium of your
10.50 lakh 1,87,500
investment choices’. Do note that under
11.00 lakh 1,87,500
Section 80 CCD(1B), you can save tax on
11.50 lakh 1,87,500 an additional `50,000 (over and above
12.00 lakh 1,91,667 `1.5 lakh) by investing in the NPS.
Among 80C investment avenues,
12.50 lakh 2,08,333
tax-saving funds (also called equi-
13.00 lakh 2,16,667
ty-linked savings scheme, ELSS) stand
13.50 lakh 2,25,000 out. They invest in equity and can be
14.00 lakh 2,33,333 most rewarding if held for the long run.
14.50 lakh 2,41,667 Also, they are transparent and have the
shortest lock-in period of three years
15 to 50 lakh 2,50,000
among 80C investment options. The
All numbers in `. Equilibrium points include the standard deduction table ‘Top 10 tax-saving funds’ lists some
of `50,000.
10-year return toppers.
If you plan to buy life insurance,
Top 10 tax-saving funds by which comes under Section 80C, it’s
advisable to go for pure term plans
10-year trailing returns rather than ULIPs or endowment poli-
cies. ULIPs and other traditional insur-
Returns (% pa)
ance combine both insurance and
Schme name 5 yrs 10 yrs investment but provide neither ade-
Axis Long Term Equity 13.64 16.77 quately. On the other hand, term plans
Invesco India Tax Plan 13.43 14.16 get you a large cover at a nominal cost.
BNP Paribas Long Term Equity 11.69 13.63 COVID-19 has made us realise the
DSP Tax Saver 14.12 13.59 importance of health insurance. Under
Tata India Tax Savings 12.77 13.36 Section 80D, you can claim tax exemp-
Canara Robeco Equity Tax Saver 15.16 13.21 tions for health-insurance premiums for
yourself, spouse and dependent children
IDFC Tax Advantage (ELSS) 12.72 13.01
for up to `25,000 (`50,000 if the policy
Principal Tax Savings 13.45 12.65
includes senior citizens). You can also
BOI AXA Tax Advantage 15.09 12.61
buy health insurance for your parents
Aditya Birla Sun Life Tax Relief 96 11.74 12.53 and get a deduction of another `25,000
Data for regular plans as on January 31, 2021 (`50,000 in case of senior citizens).

10 BUDGET & YOU



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WE’RE HERE TO HELP

INVESTORS SAVE TAX AND


AIM TO BUILD A BRIGHTER

FUTURE.



Franklin India Taxshield is a fund in the equity linked
savings scheme category that offers investors tax
deduction on investments up to `1.5 lac under Sec
80C.
The fund offers the following benefits:
• Tax Savings
• Growth Potential Of Equities
• Lock-in Period Of 3 Years Only

Call your Mutual Fund Distributor or visit
www.franklintempletonindia.com




















PRODUCT LABEL

Alternative to: Suitable for: This fund is suitable for investors who
are seeking*:
• Long term capital appreciation
• An ELSS fund offering tax benefits under
Section 80C of the Income Tax Act
*Investors should consult their financial
Tax Saving Long Term Tax Saving Investors understand that their principal will be at
distributors if in doubt about whether the
Instruments Wealth Creation Very High risk
product is suitable for them.
Riskometer is as on January 31, 2021







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