The main advantage of IIS is tax deduction.
Every newbie who has just started investing inevitably comes across this abbreviation. How to open an IIS, what an IIS is – every Russian investor probably asked himself such questions at the start of investing.
Let’s see what it is and what benefits this IIS brings. In this article, we also want to analyze whether it is actually possible to get a guaranteed yield of 13% on the IIS (spoiler – not really).
A tax deduction is an opportunity to get back the personal income tax paid by you 13%. Everyone who works for a salary and pays personal income tax from it gets the opportunity to return the tax. This is such a privilege from the state. I highly recommend using these benefits – 13% of your salary is not lying around on the road. Below we will look at a real example.
By the way, in one of our articles, Million from the State, we have analyzed all possible types of tax deductions. We wrote that anyone who pays personal income tax at 13% can receive up to 52,000 rubles a year from the state if he invests. So, as we said, IIS, or in other words, an individual investment account is just one of the tools for obtaining this deduction of 52,000 rubles.
Let’s highlight the basic and important facts about IIS:
- IIS is a brokerage account that is opened for the purchase of various financial instruments. You can also open a brokerage account separately, but no deductions will be made from a regular brokerage account.
- IIS can only open one at a time. If you opened the second one, you must close the first one.
- With IMS, you can get 2 types of deduction – type A or type B – either one or the other.
- A type A deduction is called a contribution deduction – it is a refund of the income tax you paid, or in other words, the NFDL. This option is suitable if you are paying personal income tax.
- Type B deduction is an income deduction. When choosing type B, you do not pay taxes on the money earned.
- It is sometimes said that different types of IIS can be opened, but this is not the case. The type of deduction differs and you can determine it at the moment when you file a declaration to receive a deduction.
- On the IIA, you can get a maximum of 1,000,000 rubles, when deducting type B, this amount is taken into account.
- But a type A deduction can be obtained only from 400,000 rubles that you have entered on the IIS.
- If you have decided to receive a type A deduction from your IIS, you cannot close it or withdraw money from it for 3 years. If you got your taxes back in the first year, and the next year you decide to close it, you will have to return the deduction back to tax.
- To receive a deduction from the IIS, at the end of the calendar year, a tax declaration is submitted in the form of 3 personal income tax. The period for which you can return the paid taxes is 3 years. If you paid tax more than 3 years ago, they are not deductible.
How to open IIS – type A or type B?
This is the most frequently asked question from newbies. In fact, as we explained above, the IIS opens of the same type. The division into types is for tax deductions, not accounts. Therefore, feel free to open IIS, you can decide on the type later.
Why is it important to open IIS as early as possible?
The fact is that deductions from it can be obtained in the new year, even if you have owned this account even for several days in the past. For example, if you opened an account on December 28, 2021 and deposited up to 400,000 rubles into it (this amount is correct at the time of this writing), then in 2022 you can already file a declaration for a deduction from this money and get up to 52,000 rubles back to your account …
Why did we mention at the beginning of the article that the profitability of IIA is not 13%?
Because the deduction is limited to the taxes you paid. If for the year you paid less than 52,000 rubles of personal income tax or have already returned part of your tax in the form, for example, a deduction for the purchase of an apartment, for the IIA you will return only as much as you paid personal income tax, minus what you have already returned.
At Fingram, we don’t like it when unscrupulous bloggers confuse profitability, profit and manipulate numbers like this. Yes, you can return 52,000, but if you pay such personal income tax. There is no question of any profitability here, this is a tax break.
But back to the IIS. If you have to keep money for 3 years, what should you buy on the IIS?
We personally believe that OFZs or any reliable bonds are the best option. But this is the easiest option. It is better to learn how to make portfolios for your goals, for your income, knowing your risk tolerance, we teach this in our courses.
How to open IIS?
This is very easy to do. Choose a broker (for example, according to our book for beginners), open an account in the office or even online. If you have chosen a bank as a broker, and you are already its client, most likely you will open an IIS in a couple of clicks or in the bank’s application.
Example 1:
Your income in the past 2020 was 960,000 rubles per year (80,000 per month).
In the past 2020, you paid personal income tax at a rate of 13% – 124,800 rubles.
In the past You invested 400,000 rubles in 2020.
In the current 2021 you can return 52,000 rubles as a tax deduction.
Let’s consider another example:
Example 2.
Your income in the past 2020 was 360,000 rubles per year (30,000 per month).
In the past 2020, you paid personal income tax at a rate of 13% – 46,800 rubles.
In the past In 2020 you invested 400,000 rubles (well, like that, you saved up more than you earned, for example, you were engaged in additional activities as an individual entrepreneur).
In the current 2021, you can return 46 800 rubles as a tax deduction.
And a third example.
Example 3.
Your income in the past 2020 was 960,000 rubles per year (80,000 per month).
In the past 2020, you paid personal income tax at a rate of 13% – 124,800 rubles.
In the past You invested 200,000 rubles in 2020.
In the current 2021, you can return 26,000 rubles as a tax deduction.
It turns out that your deduction is limited to: the amount of the contribution to the IIS + taxes paid by you. If you invested all 400 thousand, but paid less than 52 thousand taxes, only the tax amount will be returned to you, and vice versa.
As a result of the article, we urge you to open the IIS as quickly as possible. This is a great way to start investing and still get tax breaks from the government.
An important point. Often, novice investors confuse the withdrawal of funds from the IIS and the sale of financial instruments on the IIS. So, you can sell, for example, shares on IIS. But you cannot withdraw funds within 3 years from the opening. By the way, you can also control where coupons and dividends from your financial instruments will be displayed. You can tell the broker to withdraw coupons and dividends to your bank account, and not to the IIS, then you will withdraw at least your earnings from the invested funds.
By the way, at the time of this writing, there are talks about allowing partial withdrawal of funds from IIS, but these changes in the legislation have not yet been adopted.
How to start investing?
Connect to our section Invest 2000 in our Instagram account – learn from a real example – I, Rustam, the founder of the school, invest 2,000 rubles once a week and explain why I made this or that choice. You can follow my decisions and learn from my example.