As March 31 approaches, there is a rush for investments in schemes that help save income tax. Generally, when such savings are done in a haste, in a herd mentality or on the advice of a bank relationship manager it is found later that the wrong choice was made.
For these tax-saving investments, everyone gets time from April 1 onward of the financial year. So, one has a year to decide on the asset for investment.
The following are investments that help save income tax under section 80C:
Public Provident Fund
Life Insurance Premiums
Mutual Fund Equity Linked Savings Schemes (lock in for three years)
Principal Repaid in Housing Loan
Bank Fixed Deposit (lock in for five years)
An amount of Rs 1,50,000 is available as a deduction from your income. Generally, salaried employees are required to submit proof of the above investment by the end of February.
It is beneficial to plan the investment at the beginning of the year - that is in April with the guidance of an investment advisor. It’s not necessary to adhere to all that the investment advisor suggests, but it does help to seek advice or opinion. However, exercise caution while selecting a financial advisor. Check his/her experience, professional qualifications, recommendations received if any, etc.
There are certain sure events in one’s life like children’s education, children’s marriage, and retirement. These are important aspects when it comes to meeting financial goals. One must also take into consideration that when investments are done, tax is saved in the same way when one receives money, the amount received should be tax-free.
There are certain thumb rules that one needs to take into consideration while charting a financial plan.
Rule 1
Of the total income, 30% needs to be saved. From the savings, 50% has to be towards short-term goals and 50% towards long-term goals, which are mentioned as sure events.
Rule 2
EMI towards loans (housing, vehicle, etc) should never exceed 30% of the income.
Rule 3
Monthly expenses should be managed in the balance 40% of your income.
If one meticulously follows these thumb rules, financial difficulties will not arise.
For any financial goal that you may have such as planning for retirement, buying a dream house or a child’s education or marriage – the first step is planning. This planning is all about investing your savings in the right place, with the right advice so that you have enough wealth to turn your goals into reality. In simple terms, building a financially strong future where you don’t have to worry about money to achieve your goals.
Start the financial year by putting your money to work so that you can experience financial independence. It is equally important that you take good care of your health as health is the real wealth. While money can remove financial stress, good health can help one earn more money and in turn more happiness.
