As the financial year end draws near the salaried people have to submit the proofs of investments to their employer. Often it is called the season of tax savings.
For many of us, investment is equivalent and limited to tax saving products. But have we given a thought whether the products which we use to save tax will help us reach our goals? Or we just 'invest' without giving a thought to what our goals are? Setting a financial goal is deciding how much money is required for what and when.
For those who cannot save and invest beyond the section ‘80C’, it becomes even more important to choose the right products. The 80C category popularly contains our life insurance premiums & ULIPS, contributions to PPF & post office schemes, ELSS etc.
Let us think differently for a moment. Instead of saving tax, should one pay the legitimate tax and invest the balance amount in products outside the gamut of 80C? I believe this can help people achieve their goals. Else the same people fall into the debt trap of personal loans, credit card loans to buy a home, pay school fees etc. Basic calculation shows, for those in 10% & 20% tax brackets the maximum tax saved is 15k & 30k respectively. The interest paid on the personal loans will easily be more than the tax saved.
So give a thought to all these before buying the new exotic tax saving product or paying the hefty premiums.
For the insurance part one should look at term plans. We will learn about this later.
And yes please share ideas, experiences and alternate views.
Prasad Patwardhan
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