When you have to save on taxes, it's better to start investing at the beginning of the year and enjoy best of both worlds
COME January and it's time to plan tax-related investments. The usual favourites are Public Provident Fund (PPF), National Savings Certificates (NSC), and equity-linked savings schemes (ELSS), bank deposits, and life insurance, which help you save taxes up to Rs 1 lakh under section 80C. But what we need to follow is a systematic approach to make gains from these investments than merely save on taxes.
"The best thing for an investor to follow is to invest in tax-saving instruments from April itself. The salaries shrink in the months of January and February. At this juncture, investing the balance funds for saving taxes will tighten cash flows," says Suresh Sadagopan, a certified financial planner, Ladder 7 Financial Advisories.
MAKE PPF A HABIT
Investors tend to invest chunks in PPF in the last two months of the financial year. In such cases, investors don't benefit from the annual return of 8%. Ideally, an investor should invest before the 5th of every month in PPF to earn interest for that month. In case of cheque payments, ensure your cheque gets cleared by this date.
GAIN FROM HEALTH COVER
Most employers offer health benefits to employees in the form of group mediclaim covers up to a maximum of Rs 5 lakh. Hence, you may not feel the need for a standalone mediclaim. PV Subramanyam, a chartered accountant and financial trainer says: "The need for this cover will be felt especially in case of a job loss, retirement or a job transition as the employer's cover will lapse." You can opt for a family floater for dependents and benefit from lower premiums of up to 20%. Additionally, you save taxes of up to Rs 15,000 if you cover your dependent parents.
CASHING IN ON YOUR HOUSE
If you and your spouse bought an apartment for Rs 60 lakh and made a down payment of Rs 15 lakh, both will borrow Rs 22.5 lakh each, assuming the ownership share is in the ratio of 50:50. The overall tax deduction in your case would amount to Rs 3 lakh. The tax benefit will be shared in the same ratio as the ratio of the loan amount availed by the husband and wife. The idea is to give a higher ownership share and hence, the higher liability to an individual with higher taxable salary.
