Don't wait for March, Plan your Tax saving investments NOW!

Most of us feel Tax Saving is a boring exercise done each year in March. Once completed, you can sit tight for rest of the year & wait till the next March deadline. Let's look at the Google Trends for the keyword 'Tax Saving'.

The trend shows on a scale of 0-100, how popular was the term searched across the internet. No doubt, the trend line peaked to 100 during Mar'18 & is at the lowest during April'19. Does it suggest something?

Yes, most of the population only invests to Save Taxes. But are you really gaining anything by making rush investments just before the deadline? Many investment experts suggests if an individual doesn't start tax planning in the first quarter of the financial year, it is often postponed till Feb or March or sometimes literally, 31st March.

One of the ill-effects of doing this last minute catch-up is that we forget that tax-saving investments are investments first. Yes, you do want to save taxes - but the primary objective of investing is to grow your money!! Isn't it?

Financial & Tax Planning

The last minute investments are usually made into the instruments which are more convenient, rather than the ones which will reap good fruit in the longer term based on your risk & investment profile. 

These days everyone has an Internet Banking account & the most convenient way to make an investment is to put the money into 5 year fixed deposit inorder to save taxes under Section 80C. During this rush hour investment, will you opt for ELSS if you don't have the KYC done yet? No, you won't because all you want now is a way to save taxes & investment returns takes a backseat. All the investments will be made in the pressure of missing the deadline or under the intense selling by agents.

Even if you choose to invest into ELSS - you would rather make a lumpsum investment to achieve 1.5 Lakh limit under Section 80C & in case of short term volatility, would loose your sleep. Wouldn't it have been amazing if instead of depositing INR 60,000 in March, you would have made this investments as SIP (Systematic Investment Plan) for INR 5,000 per month. It would have lowered down the risk of equity investing due to cost averaging & would yield better returns in the longer term. All those who are new to Mutual Fund Investments can read through the interesting benefits of SIP here - SIP - THE MAGICAL RECIPE FOR FINANCIAL SUCCESS

Specially in the case of insurance, when you make tax-related payments in February or March, you don't have time to evaluate all the options properly. You are under pressure to submit investment proofs, so you go for investments that give you tax receipts immediately. In doing this, many people end up buying the wrong insurance products.

Keep It Simple, Silly - No we don't mean to offend you. This is the KISS principle adopted by the U.S Navy in the year 1960, which states most systems work best when they are kept simple rather than making any unnecessary complications. The same principle works best for your Financial & Tax Planning. 

Financial planning is equally important as tax planning. First, you need to figure out your goals and how much money you require to achieve those goals. Accordingly, zero in on suitable investment avenues. The investment instruments must first align with your long-term goals. Look at tax efficiency only as an added benefit, and not the other way round.

Start Early, evaluate all your tax saving investment options & enjoy the investment journey. 


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