How to avoid last-minute tax planning mistakes
Taxpayers often commit mistakes in a rush to save tax. Here's how to avoid investing errors you might regret later.
STEP I: CALCULATE HOW MUCH YOU NEED TO SAVE
Add up all the tax-saving investments done till now
Also add these expenses and investments
Find out how much more you need to save
STEP II: NOW CHOOSE AN OPTION BASED ON THESE PARAMETERS
Safer options give lower returns
Taxability of income
Take tax into account when calculating returns
Some investments offer very low liquidity
Tips for investors
- Keep these points in mind when you invest You have very little time to study investment options in detail. So don’t go for investments that require a multi-year commitment.
- Don’t invest a large sum in equitylinked options such as mutual funds and Ulips at one go. Such investments are best made through monthly SIPs.
- If you don't have time, go for the safest bet: Bank fi xed deposits and NSCs. Returns are low because the interest is taxable but you can’t go wrong.
- Don’t wait till the last day to invest in PPF and Sukanya scheme. Give a margin of 2-3 days for cheque to be credited to the account.
SIPS DO BETTER THAN LUMP SUM INVESTMENTS
YOU CAN’T GO WRONG WITH BANK FDs AND NSCs
The interest is fully taxable but there are no charges or multi-year commitments.