Tax Planning should be a well thought over as the purpose is not just to save tax but to invest in the right product suitable as per one’s need. I am a strong believer of ” One Size Doesn’t fit all “ and the same applies to Tax Planning as well.
The objective should be to allocate this amount allocated towards your goals rather than just ” Axe the Tax.”
It should be done as per Age, Risk appetite, goals and well in time.In other words, one can Start Tax Planning early in the year and don’t wait for JFM (January, February and March)
Last-minute dumping of money can prove expensive and fail to give optimum returns.
Usually,the last 4 weeks of the Financial Year witness increased activity among taxpayers to meet the deadline to file returns. They rush to save some taxes by investing in investment products that qualify as tax savings options. And this rush act often leads to mistakes that are carried with them for years.In addition,such investments also fail to optimise returns for the investors.
Thus,one rush job can not only make it expensive for you as an investor,but it can also fail to give you returns,which otherwise you would have got if you had planned a bit early in the year.
One can start early as one can do research on the products before buying. Also, it is stressful to invest in one go for tax saving and you have to shell out the entire exemption limit in lumpsum.
Following options qualify for Tax Saving under section 80c:
1. Equity Linked Savings Scheme ( ELSS)
2. Public Provident Fund (PPF)/Provident Fund(PF)
3. National Savings Certificate (NSC)
4. Insurance Policies
5. Tax saving FDs
One should invest in these being specific with their goals. For example: If one has a goal which is to be fulfilled 3-4 years down the line, then one should opt for ELSS which has a lock in period of 3 years ; If one requires insurance cover, term plan can be opted for; Investment in PPF should be considered if one has long term goal.
So, it helps if you start with the investment early well in time and believe me it is not TAXING for you in the future as well.
Make it a continuous exercise: Consider this as part of your and your family’s long-term financial planning Get a financial wrapper: Have a single financial advisor or planner to help you with all your investments,rather than different persons selling different products to you Involve family: Your tax and financial planning is foryour family as a whole. Involve your family members,it enhances financial bonding .
Take responsibility and finally settle for the best solution.
About the Author: Gurleen Kaur is a Financial Consultant and devotes her time to her company www.hareepatti.com. She has done her Bachelors in Finance and Investment Analysis(BFIA) from College of Business Studies(CBS, Delhi) and MBA from IMT, Ghaziabad. She will be a Certified Financial Planner soon. She can be Contacted at gurleen@hareepatti.greatestdesignever.com