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Invest wisely: Plan your finances better to save taxes

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Kalpesh Ashar

The sheer utterance of the word “tax” emits a negative feeling in most people. Not only in the realms of the real world, but in the iconic Bollywood film Lagaan, which was based on a fictional story dating a century back, the protagonist had a “fear of paying tax”.

Over the years, terms such as “evasion”, “concealing”, “provision” and “savings” have been commonly associated with tax related issues. This is primarily because taxes are seen more as a burden to the common man.

It’s on rare occasions that “planning” is associated with tax related matters.

“How can I part with my hard earned income with the government?” This is something that has engulfed many minds. And a majority of us try our best to minimize the impact of taxes.

Moreover, when someone offers “quick fix solutions” to reduce tax outflow from one’s pocket, everyone from salaried employees to professionals, entrepreneurs and corporates could ponder over it or give it a second thought.

For the salaried class, the months from January to March spell chaos as there is a rush to complete last minute tax saving measures. This is the time when year on year unwanted insurance-cum-investment policies are purchased and forgotten as quickly, as they were purchased for only saving taxes.

There are cases where young couples invest in property to avail tax benefits on the interest paid on a home loan. This is regardless whether the purchase is affordable or even required.

So do remember, it is imperative for everyone to look at all financial aspects to achieve financial goals. Tax planning is important part of saving money, but not the ultimate motive.

Most people forget that tax planning is a simple process which eventually amalgamates with financial planning. The decisions taken as part of the financial planning process should find a place by default in your tax planning.

Commonly used sections for tax savings provide deductions and eligibility formulated in a thoughtful manner that easily merge with an individual’s financial profile.

There are provisions for long term investments in fixed income through EPF and PPF – two of the most tax efficient guaranteed investment products. Equity investments are covered through ELSS, premium for term plan insurance is deductible, health insurance premium for you and your dependants is considered and your home loan interest and principal amounts are also covered.

Beyond these, an individual’s investments should be diverted in appropriate financial assets linked to their goals. Paying taxes on time is the duty of every citizen and let this process not “tax”, but “relax” you.

Note: The writer is certified financial planner at Full Circle Financial Planners and Advisors.

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