Avoid rush on D-day for Tax saving investments
It is the start of february month, everyone seems very relaxed and hardly any one is really concerned about the investments to be done for saving tax. After exactly one month the picture might not be the same. Usually people do the needful savings in march month which is the last month of the financial year.
A little concern about the tax front can save a lot of trouble in the last few days and weeks of the financial year. As the last couple of months approach for the financial year to end; it is time for the individual to review their tax requirements because this can cause a lot of trauma and trouble in the days ahead if left unattended.
Here I have tried to sum up three most important areas where it is wise to make sure that the process is completed in time :
Investing in Infrastructure bonds
You can avail an additional benefit of Rs 20,000 available as a deduction for inividuals for investing money into infrastructure bonds under Section 80CCF of the Income Tax Act. This is in addition to the Rs 1 lakh deduction under Section 80C. There is a common tendency of people to put off this investment till the last extent possible and this can result in a position where there is a last minute rush to meet the requirement. Investors should try and ensure that the actual process is over in february itself rather than leaving this till March. The major reasons why this needs to be done is seeing the fact that there might not be some issue open in the last few days of March. The other point is that even if an issue is open it might not provide any choice for the investor and they would be forced to accept whatever is offered. It is always better to choose something that actually benefits us rather than choosing some less beneficial bond for the sake of time.
ELSS (Equity Linked Saving Scheme) investments
ELSS funds that also has a deduction under Section 80C. A last minute rush is not at all the best way to make an equity investment. The ideal way to invest would be for all the twelve months in the year right from the start of the financial year but this is often not possible. However this does not mean that the investor leaves this investment option right till the very end because then they end up raising the risk in the investment. On the other hand if there is some time that remains for the investment to be completed then it is easier to spread this out and hence also spread out the risk from the investment. This will make a difference in the productivity of the investment and hence it is an important thing to consider. The right strategy is invest through out the year according to your capacity and market scenario.
Submission of Investment proof submission
For all salaried individuals, there are different internal deadlines for the submission of the investment proof details to their employers. This submission is important because the tax that is deducted each month from the income depends upon the investment declaration made at the start of the year and then its actual implementation. In such a situation if the details are not submitted on time then there would be a position whereby there would be an extra deduction of tax in the last one or two months. This might not be reversible in the last month of the year if the individual waits till the very end to complete their required investments and subsequently the individual could end up bearing a hefty amount of tax deduction which will take time to refund. This means locking up the money for some time which can be avoided by acting right on right time.
Advice for Investment Planning
It is essential that all aspects of tax planning are considered. If tax-planning is not done and there are some hasty steps taken then it could result in a situation where future planning can also be impacted.
For example in the last minute rush taking an insurance policy when it is not required can lead to a position where for many years the premium payment will put a burden on the finances without giving the required benefit. Such financia crunch caused by extra premiums can be saved if you plan in right time for one time investments for saving tax.