Under section 80 C of Indian Income tax act, an individual is allowed to claim a tax deduction on investment of Rs 1.5 Lakh. One can invest in avenues such as fixed deposit, public provident fund, national pension scheme, etc. Although tax saving may be an important benefit of investment, it should not be the only driving factor for all your investments. Improper planning can cost you potential good returns.
Here is why you should look beyond tax saving:If your entire investment planning is around tax saving, you might miss out on other potential returns that can come out of other financial instruments.
Tax saving avenues often comes with a lock-in period. A lot of people put their money without understanding that withdrawal will only be possible after a certain period of time. Otherwise, there can be cost implications of exit load.
Investments should be decided on the basis of factors such as risk appetite, future needs, duration, etc. If you are looking for returns in a short duration, you should choose an option without any lock-in period.
Most people purchase an insurance policy just for the purpose of saving tax. However, an investment like that of an insurance policy should be well planned as it is a long-term investment as well as acts as a saviour in the times of uncertain events. Tax saving is an added advantage, but the primary goal should be covering the future financial needs of the family.
The Bottom LineInvestment goal may vary from person to person and family to family. It depends on many factors, such as expenses, lifestyle, income, future goals, etc. Every individual needs to assess their goals and accordingly make investments. Whether short term or long term, it should fulfil your purpose of investment.
There are many avenues that offer the best of both worlds i.e., great returns as well as tax-saving benefits. Talking to a professional financial consultant is recommended before assessing goals and putting money in avenues as an investment to reap the maximum returns.
The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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