Do you wait until March to take stock of taxes? You are making the commonest but gravest financial mistake.
New Year we celebrate with full gusto, but it is the beginning of the financial year that deserves celebrations. The new financial year brings with it hope and motivation for better financial discipline as we move ahead in our investment journey. Do you know the beginning of the financial year, not February or March, is the most appropriate time to get your finances and taxes in order? We see people scrambling for tax-saving certificates at the end of the financial year, but the beginning of the financial year is when you should give full attention to it and plan all of it to avoid last-minute hassles and earn more profits. We tell you why April plays a big role in your tax planning:
1) Earn more profits
Putting lumpsum money in ELSS or PPF in February or March will hardly earn any interest or returns compared to doing the same in April. The longer you stay invested, the better returns you tend to earn in ELSS. So far as PPF is concerned, if you invest the amount before 5th of any month, you earn interest for that month also. For example, if you put money in PPF before April 5, you will earn interest for the month of April. However, if you invest in it after April 5, you’ll lose out on interest for April. This money will earn interest from May onwards.
When you do have to make these 80-C-linked tax investments eventually, why not do it in the beginning itself!
2) Stagger your investments
Often we find ourselves unable to collect a lumpsum amount for investments. This is when SIPs come to our rescue. If you plan your taxes right in the beginning and accordingly start your investments, you can stagger it on a monthly basis. You don’t have to put a lumpsum amount in ELSS or PPF. Invest a smaller amount periodically the whole year. You will get tax deduction on the cumulative amount when you file your income tax return (ITR).
3) Enough time to research about products
The goal of any investments is to serve your life objective. Taxes are secondary. When you do it in February, a tax-saving approach takes precedence over the core of investments, that is, serving a life goal. Choose an investment product after knowing all about it in detail. For example, if you buy a life or a health insurance product, usually you pay the yearly premium in one go. However, you do have an option to make monthly, quarterly or half-yearly premium payments. The aggregate amount does inch up compared to the one-time payment, but it gets affordable.
(Contact us at 8178271045 if you are willing to buy a life or a health insurance)
4) Avoid last-minute hassle
End of financial years is always taxing. You do get a lot of work to take care of. During the same time, your employer hounds you for tax documents. If you keep your taxes and investments in order from the beginning of the financial year itself, you wouldn’t face unnecessary burden at the year-end.
5) Smart investing
April is when you should sit with your financial planner to take a look at your life goals and what all means you have to reach end goals. For example, if retirement corpus is key to you, investing in National Pension Systems (NPS) makes better sense than taking the ELSS route so far as 80-C tax-linked investments are concerned. If you want to optimise your employee provident fund, then there are ways to do that too. All you need is a fee-based financial planner who can help you figure out your investments and offer you personalised advice that suits your financial condition and life goals.
(Contact us at 8178271045 to create your own financial plan)
You don’t want your money lying in a savings account or the worst, channelising it in inefficient investment avenues. Make your money work for you – and that too throughout the year for better return on investments. Optimise your investments as per your life goals. Tax-savings is a corollary. Be responsible for your money. Take action NOW. We at Caterpillar will join you and assist you to your financial freedom.