“Oh the 80C limit has increased. I’ll have to increase my investments to save tax”!!! This is the most talked about thing on office desks and dinner tables these days. Tax saving is something that most of us are very serious and concerned about and hence we do every possible thing to reduce tax liabilities to minimal. But what is it that you are buying for??? Are you buying it just to save tax or save tax and fulfill financial goals such as retirement, kids planning etc.? The answer is “we want to save tax and save for our future as well”. But the fact is most of us just end up investing recklessly in a hurry to save tax and hence the financial goal takes a backseat. This is the story of first three months of every year where there are people who are selling and people who are buying.
The Name Game
Have you ever thought why is it that, in these three month we come across so many people who advise us on tax planning and financial planning followed by media which features the maximum ads on the same? The answer is because we also pay heed to it in these months only (when asked by employers or CA’s for investment proofs). The hot favorite products of the tax savings season are Pension Plans, Child Plans, Money Back Policies or ULIP’s etc. which are often sold in such names that people are lured to buy them. Companies build an emotional trap and people fall in it.
Reality is, tax saving is not a one-time ritual but it is a well-thought strategy which should be aimed to fulfill your goals whether it retirement or kids or wealth creation. Government gives you this incentive of tax saving so as to encourage you to save and invest for your financial goals.
Know What’s Right for you
Align your tax savings investments to your financial goals and do what’s right for you. Let’s see the ways through which you can make the most out of your investments this tax saving season:-
It is the biggest and the longest financial goal that we all have as it involves a planning for 40-50 years of someone’s life. And hence equities are by far the best tool to plan for retirement. So if you have started an ELSS or planning to start one make sure you earmark it for your retirement. In case you are nearing your retirement or have reached your retirement ELSS is still a good option as you would not use your entire corpus in one go and would use over a period of time in retirement.
Unlike retirement, kids financial planning is a bit tricky and the goal is accomplished when your young ones make it to their college or when their wedding day arrives. Hence the entire corpus would be used in one go. So if you still have 10 or more years before the goal arrives i.e. higher education and wedding; ELSS is your bet else PPF or 5 year Bank Fixed Deposits is your way. The idea is to be aggressive for long term and go defensive as you are nearing the goal.
Premium paid for life insurance is eligible for deductions u/s 80C and for health insurance is deductible u/s 80D. If you are planning to have a life insurance, simple plain term is the best bet and in case of health insurance make sure you take a policy which does not have sub limits.
Make financial goals your priority and chalk out how it can help you to save taxes as well. Remember, it’s always wise to KEEP IT SIMPLE AND STUPID.