When it Comes to Tax Planning - Make a Fresh Start!

Shyam, an account manager in an advertising agency, waited until mid-March to make his investments for tax rebates. For a long time, he procrastinated this decision. Now at the last moment, he invests his money into various kinds of instruments some of which provided him with no or limited tax benefits. or

Just like Shyam, do you wait until mid-March to do your tax planning? Most salaried individuals keep their tax planning for the last minute. And at the end of the financial year, they scramble to get their tax investment proofs. In fact, most individuals start looking for tax saving products only when their employer reveals the deadline for submission of the documents. If such a scenario continues in your professional life year-after-year, you are in for a financial disaster. In a hurry to meet the deadline, most people end up buying products that are not suitable. The right way to do your tax planning is to start at the beginning of a new financial year or at least right now where you have enough time to analyze the same.

Remember that tax planning is just one part of your overall financial plan. Saving tax is just a by-product of the investments that you make which form a part of your overall investment portfolio. When you start planning before time, you get enough time to focus on your asset allocation and to take a well-informed decision. Most tax-saving products have a lock-in period. The sooner you invest, the sooner the lock-in period is completed.

To begin with, you must be aware of how much money you can save under each tax bracket. Under 80C, you can get a tax benefit of up to Rs1.5 lakh. The investments eligible for 80C include a contribution to public provident fund (PPF), PF contribution, National Savings Certificate, child’s tuition fee, the principal amount of home loan, unit-linked insurance plan, equity-linked saving schemes, and five-year fixed deposit scheme.

How ULIPs can help you save tax?

ULIPs offered by life insurance companies are such financial instruments that offer tax savings as well as multiple other benefits. The tax benefit provided by ULIP is Unit Linked Insurance Plan offers life insurance with investment. The new age ULIP has no policy charges, no allocation charges.

Another benefit of starting early is that it will help you earn higher returns.

For instance, say you invest Rs 10000 in ULIP every month for 15 years the total returns would be 68.96 lakh.

ULIPs provide dual tax benefit that is on premium paid and maturity amount received.

To ensure you don’t end up like Shyam, know your financial goals. Take some time out every month to look through your accounts and figure out your taxation.

Aastha Mestry - Portfolio Manager          

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.