Most of what we do with respect to tax saving, planning, investment is going to be of little or no use in years to come.
The returns from such investments are likely to be minuscule or they may not be a worthwhile use of your money.
Tax planning is very strategic in nature and not like the last-minute fire fighting most of us do each year.
For most people, tax planning is akin to some kind of a burden that they want off their shoulders as soon as possible. As a result, whatever seems to save tax we blindly go for it.
What is really foolhardy is that saving tax has become a larger prerogative than the utilisation of your money.
So this year, let’s give ourselves a choice. Let’s think before we put down our investment declarations this time around. Like each year product manufacturers will be on a high note, enticing you to buy their products and save tax. As usual the market will be flooded by agents and brokers selling you solutions.
Here is a guide map to help you wade through the options and ensure that:
1. Tax is saved and that you claim the full benefit of your section 80C benefits.
2. Product are chosen based on their long-term merit.
3. Products are chosen in a manner such that multiple life goals can be fulfilled and they are in line with your future goals.
4. Products that you choose help you optimise returns while you save tax.
With whatever you have done in the past it is important to understand the future implications of your tax saving strategy. You cannot do much about the statutory commitments and contribution like PF but all the rest is in your control.
Insurance: If you have a traditional money back policy or an endowment type of policy understand that you will be earning about 4-6 per cent returns on such policies.
In years to come this will be lower or just equal to inflation and hence you are not creating any wealth. In fact you are destroying the value of your wealth rapidly. Such policies should ideally be restructured and making them paid up is a good option. You can buy term assurance plan which will serve your need to obtaining life cover and all the same release unproductive cashflow to be deployed into more productive and wealth generating asset