If you invest in tax saving schemes right now, you can get your money back early. For example: If you have planned to invest in Fixed Deposit which can’t be withdrawn for 5 years, if you deposit today you will get your money back in 2013 December and you can use this money for tax investment again. Where as if you save it in March, you will get it back only in 2014 March and you will have to again go in search of cash.

Most of us spend all the cash in hand all through the year and try to find some cash in March. If we don’t find cash in March then your tax plan will go wrong.

Some people are of the opinion that even if I save on 31st March it will still come under this financial year, but this is not clever thing if you are trying to invest in Tax Saving Equity linked funds (ELSS) or Public Provident Fund. You will stand to loose 4 months of interest free income.

Some of us will wait till the year end to submit the medical bills or bills of books purchased for research etc. There is a chance of bills getting lost. It’s better to submit these bills every month to the concerned department in your office.

What about the investments I have made in the financial year ?

Before making any tax saving investments, it is always better to review the investments you have already made in the current financial year. In case you have made investments through Systematic investment planning (SIP), or already contributed to PPF, add all the amounts and plan for the remaining amount.

Get your calculations right:

• For employees there is PPF and it will anyway come under Section 80C. Some employees also would have taken health insurance, life insurance, or group insurance policy. First calculate the amount you have already paid towards premium.
• For those who have taken home loan, calculate the EMI you have paid for all the months. See the interest and principal component in that. You can get the principal paid on the loan exempt under Section 80C. You can claim exemption on interest up to 1.5 Lakh per annum.
• Also take into consideration, the tuition fee you have paid for your kids (allowed only for 2 kids).
• Take into consideration all the above and then decide on the amount for which you have to do tax planning.

• After all your tax planning is done if you are falling under 10% tax bracket and tax payable is not less than two to three thousand, it’s better to pay the tax instead of making investments only for saving these two or three thousands.
• Accounts folks in your office would have already informed you the amount of tax payable. Once you have calculated the amount invested so far, return from the amount invested, and the amount to be invested, all that you need to decide is to where to invest.
• If you don’t have the appetite to take risk invest in National Savings Certificates and Bank Fixed Deposits and if you are planning to invest for long term, put your money in Public Provident Fund.
• If you have the ability to bear risk, invest in Tax Saving Funds or ULIPs.

Instead of investing your money at once, it’s better to choose SIP and invest in 5 equal installments.

Image Credit: Kevin

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