It’s that time of the year when you’ll get to see big queues outside all the offices which sell products that allows you a rebate u/s 80C. Isn’t it? You also must be having a lot of questions about where should you invest to fulfil the limit of Rs.1.5 lacs. Have you ever thought why people worry about it only in the month of March every year? The sole reason for this is, because for most of us tax planning is a one-time ritual that is performed only when you near the last date to do so. We rush so that we can save ourselves from paying taxes in the month of July or September.
By far Indians are great savers but poor investors. Hence in order to encourage people to invest their savings, government gives this rebate of Rs.1.5 lacs to all the tax payers in the country. But the question is are we using it judiciously?
Tax Planning and Investment Planning are not different
With time people have started considering tax planning as separate goal which is no more a part of their overall investment plan.
Recently a client called up one of my colleague and told him that he wants to invest some amount in ELSS. My colleague asked him “Sir, Can you tell me with which goal should I align this investment”? He immediately replied Tax Planning. After a long discussion my colleague explained him that tax planning is a part of your financial planning only and the only difference is that some of your investments are tax efficient and others are not. But all your savings are for some goals of yours and tax planning is just a way to promote savings amongst the people.
Mistake we make
Often in a hurry to plan taxes, we invest in a manner that is not in sync with the overall portfolio. For instance, if you have a debt-heavy portfolio due to contribution to employee provident fund or FD’s or endowment plans then instead of choosing to invest in PPF or other tax efficient insurance plans, you should invest in tax saving ELSS schemes which would give you exposure to equity.
But one might say I don’t need equity investments! Well that is something your financial goals will tell. Hence it’s always recommended to define your goals so that you identify the asset class you should invest in to achieve your goal. So when you plan your taxes by investing in tax saving investments, make sure they are in sync with your overall investing plan and are aligned to your financial goals.
In the end I would like to conclude by saying that all your hard earned money is for you and your family’s financial well-being and not just for tax planning. It’s about Your Life – Your Needs – Your Money!