Tax Planning OR Investment Planning OR Both

– Meghashyam Sinkar

Last month , we have written on NPS  ( All About NPS – National Pension System). We have received lot of queries on it mainly regarding tax saving . We would like to tell you that NPS was having tax benefit for last couple of years under section 80CCD(1B) , over and above 80C limit of Rs 1.5 L . The main reason on advising it now is due to its change of tax treatment on its maturity .

There is too much focus on tax savings while investment aspects hardly get addressed . This leads to bad choices of instrument without understanding its risk , suitability & need.

In fact that some of the worst investment decisions that individual takes are with their tax savings investments .

Investors choose Equity Linked Saving Schemes (ELSS ) over other tax savings instrument just because it has least lock in period (3 years) amongst other available instruments in this space . But it is pure equity instrument which should be considered only when you are willing to stay put for 7 years & above. Lot of investors then get disappointment and never invest again . Then they commit long term savings into traditional insurance plan which hardly give any real rate of return .

Therefore , one should ideally plan for their financial goals first and then choose the investment instrument which is aligned with your goal and also gives the tax benefit simultaneously .Tax saving should be byproduct of the investment .

Avoid Last minutes tax planning . Planning in advance releases time pressure which will reduce the mistakes ultimately .

We are sharing the tax saving sheet which can be accessed by clicking on below link . You can download to see the gap and plan accordingly if any .

Pentagraph – Income Tax FY 19-20

Please feel free to write or call us for any assistance.

Happy Investing !!