Most of us would be busy in planning how to welcome 2011.Clubs, Hotels, Guest Houses and your own home would be booked for grand parties or a family get together.
Also, during December to February, most corporates ask for investment proof from their employees. And so begins a race for submitting the same at the earliest.If I talk in insurance or MF industry language, we call it JFM or tax planning season.
JFM is a very busy months for insurance and MF companies.Maximum sales happens during this period.New products rollout from insurance companies and a big targets from MF companies for their ELSS Products is a common phenomenon during JFM.What drives them so crazy during these month?
The prime reason is the tax planning by us at the last minute.What should be planned during the start of financial year, we plan it during the end. And so, all our financial budgets are heavily squeezed in these months. Talk about investments to any individual during these months, the answer is same -“I don’t have any money to invest”.
The other reason is also the unawareness on options available for tax savings.We hardly avail tax benefits of Health Insurance and even very qualified people in corporates are unaware on all tax saving options.
Here we look at tax saving options available to an individual for this financial year and possible strategy you should follow during this period:
1.Section 80C: An investment of maximum Rs 1.0 lakh is available for exemption under this section. PF,NSC,PPF,ELSS,Life Insurance,Housing Loan Principal repayment,School tution fees for children’s are available instruments for investments.Generally our Tax planning hovers around Life Insurance especially ULIPs as they are the most missold products.Section 80ccc i.e. pension products are also clubbed with this section.
NPS (New Pension scheme) would be included in this section from 2012 as proposed in Direct Tax Code.
Strategy: Life Insurance is a toll for protection and requires a study on your financial needs to tell how much insurance you need.Avoid investing in it at the last moment.If you are running a PPF account, increase contribution to it. ELSS is the best option for 80C investment. Utilize it if you are investing only for tax saving and desire higher returns than Debt investments.
2. Section 80 CCF: An investment of Rs.20000 in infrastructure bonds from notified institutions is exempted from your income.This is in addition to Sec 80C benefits you avail.
Strategy: Invest in Infra Bonds as the ROI offered by the companies have been attractive.With tax saving, the net yield comes to 8-9%, which is a good investment return.
3. Section 80D: Any premium paid towards health insurance for your family (Max Rs.15000) and your parents (max Rs.20000 if senior citizens ,otherwise Rs.15000) is exempted from income tax.
Strategy:Most of the time,even your employers are not aware on the tax benefits available in Health insurance.Check from the tax calculation sheet whether the same is being included or not. Also,apart from health insurance from your employer,cover yourself from a standalone policy.
4. Section 80 E: Entire Interest paid toward education loan for higher studies is eligible for deduction from your income.
Strategy: If you are planning for higher studies or any professional course,utilize this option.
5. Section 80G: 50% or 100% of the amount donated for any good cause is eligible for deduction.
Strategy: If you are a Businessman or a Professional,utilize this option to the maximum.
Do not be misled by advertisements and advisors call.If you have missed this time, consider investing in instruments like PPF and ELSS where one time payment does not affect your financial goals.From next financial year, make sure you start your tax planning from April itslef so that your investments are spread out throughout the year.
Let Tax planning be a part of your Financial Planning. Products like insurance gives you tax benefits but they are meant for protecting your loved ones and meeting your long term goals.
Financial Doctor’s Advice: Make Financial Planning one of your new year resolution.
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This and All the other Articles/Videos on this blog are for general Information and educational purposes and not to be taken as an Investment Advice. Any Action taken by Readers on their Personal finances after reading our articles or listening to our videos will be purely at his/her own risk, with no responsibility on the Writer and the Investment Adviser. Registration Granted by SEBI, membership of BASL and Certification from National Institute of Securities Markets (NISM) in no way guarantee performance of the intermediary or provide any assurance of returns to investors.
