Taxpayers Archives - Investoinsure

If you are planning for retirement, think twice before selecting PPF

July 27, 2022

by Anuj Jain with No Comment Fixed Deposite Investment PPF

What is PPF?

Public Provident Fund (PPF) scheme is a popular long-term investment option backed by the Government of India which offers safety with returns that are fully exempted from Tax. Investors can invest a minimum of Rs. 500 to a maximum of Rs. 1,50,000 in one financial year and can get the facilities such as loan, withdrawal, and extension of account. Also, the total lock-in for the PPF account is 15 years which is too high compared to other instruments available like Mutual fund ELSS, NSC, etc.

Features of PPF account

The interest rate of 8% per annum.
Minimum and maximum investment Rs.500 & 1.5L per annum.
The Lock-in period is 15 Years.
Partial withdrawal is available after 7 years.
After 15 years account can be extended for a block of 5 years.

PPF has become less attractive over a period since it started declining interest rates, have a look

Rates were fixed at 12% between 1986 and 2000
Then between 2000 and 2003, the rates slid down to 8%
The rates then remained stable at 8% till 2011
Rates were then revised to 8.6%, 8.8%, and 8.7%.
The last few years saw rates come down to 8.1%, 8.0%, 7.9%, 7.8%, and then a historic low of 7.6%.
Rates finally saw an uptick of 8.0%.

With effect from 1st April 2016, the rates for schemes like PPF, etc. are to be considered for revision every quarter, based on the previous quarter’s yield on benchmark government securities (or bonds of corresponding maturities) with a small markup (around 0.25%).

What’s the risk?

Earlier, rates were revised once every year. But now, the revision will take place every quarter.

So, there is obviously an increase in interest rate risk as far as PPF is concerned. So, in a falling rate scenario and for someone who has a large PPF balance, it can hurt a lot.

Also, Lock-in for PPF is 15 years and in 15 years we have 60 quarters for rate fluctuation which is high.

Now, what to do?

You can check for various alternatives like NSC, ELSS (mutual funds), Tax saving bonds, etc. But among tax-saving instruments, the clear winner as of now is ELSS (Mutual fund) but a subsequent risk is also involved with it.

The risk-reward ratio works with mutual funds the higher the risk you take the more returns you get. Also, the ELSS Mutual fund has the lowest lock-in period of just 3 years. The average return in ELSS Schemes for the last 5 years is 12-16% per annum which is much higher than PPF, NSC Fixed deposits, etc.

Now let’s choose the best option with comparison.

ELSS VS PPF VS FIXED DEPOSITS

Particulars	ELSS (Mutual funds)	PPF	Fixed deposits
Objective	Growth with Income tax rebate under sec 80C	Limited growth with Income tax rebate under sec 80C	Limited growth with Income tax rebate under sec 80C
Lock-In period	3 years	15 years	5 years
Average Return	12-16%*	7-9%	7-8%
Risk	Moderate to High	Low	Moderate
Maturity	After 3 years but can be kept for appreciation to n number of years	After 15 years but can be extended in block of 5 years.	After 5 years and cannot be extended
Tax	10% LTCG on returns if gains are higher than1 lac	No tax	Taxable as per Income tax slab.
Post-tax Return	10.8 – 14.4%**	7-9%	5.6 – 6.4%***

*Returns are subject to market conditions; returns are indicated as per past performance and can be changed in the future.

** After deducting 10% LTCG from average returns.

*** After deducting tax rated as 20% tax bracket.

Conclusion

PPF is no more an attractive option for tax savings rather If you can take moderate to high risk then you can opt for ELSS Mutual funds.
Each investment is associated with certain positive and negative Parameters (mentioned in the above table).

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ITR filing last day today. What happens if you miss today’s deadline!?

March 20, 2018

by Anuj Jain with No Comment Tax-Planning

ITR filing within the defined date is very important. Filing the income tax after the defined dates has its own repercussions.

Taxpayers must keep all the required details like PAN, Form 16, and other important documents in hand while filing the returns
Until the last assessment year, i.e., AY 2017-18 there was no penalty for filing belated income tax returns.
Now, as per section 234F, an individual would have to pay a fee of up to Rs 10,000 for filing an ITR after the due date.

India: Friday is the last date to file an Income Tax return or ITR. This year, (tax filers) you are required to submit the returns for the 2017-18 financial year, and the assessment year will be 2018-19. The deadline to file an income tax return (ITR) was extended by a month to August 31, 2018. It is expiring today. If you still have not filed your tax return, it is important that you do it on time due to the changes introduced in last year’s Budget.

Penalty

However, if you still delay in filing your ITR then you might face a Penalty.
Last financial there was no penalty for late filing of ITR but A.Y. 2018-19 penalty is applicable on late filing that is after 31st August midnight(Today).
Here is a slab for Penalty (An important fact as per the amendments made in the Finance Act 2017)

For Taxpayers with income of less than or Rs.5,00,000, the fee amount will not exceed Rs. 1,000.
Taxpayers with an income of more than Rs. 5,00,000 are liable to pay Rs.5,000 fees if filing after 31st August but before 31st December 2018.
If ITR is filed on or after 1st January 2019 then fees applicable will be increased to Rs. 10,000.

However, it is important to note that if you have any unpaid tax liability, then penal interest on the same would be levied, as applicable to your case, if you have filed a belated return.
But if no tax is payable, the taxpayer won’t be liable to pay this interest solely due to the belated filing of ITR for FY17-18.

Can you revise the belated ITR?

Yes, you can. An ITR filed after the due date is called a belated return. It can be filed before the end of the relevant assessment year, i.e., before March 31, 2019, in this case. From FY16-17, i.e., AY17-18 onward, you are even permitted to revise a belated return.

However, if you file your return after the deadline, you will lose out on certain benefits and a penalty will be levied.

How much time do I get to verify my return?

Merely filing your tax return is just half of the process – you need to verify it as well. As per the present tax laws, you can verify your return within 120 days of filing it.

Can I carry forward losses if I file a belated return?

As per the Indian income tax laws, losses under any head of income (other than income from house property), can be carried forward only if the tax return is filed within the due date, i.e., July 31 now August 31. However, taxpayers can carry forward the loss under the head income from house property, even if the tax return is filed after the due date

An exemption for Kerala

Meanwhile, the government has extended the last date for filing Income Tax returns(ITR) in the flood-hit state of Kerala. The southern state witnessed the worst flood situation in a century.

“In view of the disruption caused due to severe floods in Kerala, the Central Board of Direct Taxes (CBDT) hereby further extends the due date for furnishing Income Tax returns from August 31, 2018, to September 15, 2018, for all Income Tax assesses in the state of Kerala, who were liable to file their Income Tax returns by August 31, 2018,” a notification from ministry of finance stated.

It can be noted that the extension of the ITR deadline is only for taxpayers in Kerala.