Dhan Ki Baat Ep 8: Don’t Wait for Jan, Start Your Tax Planning Now

Planning tax-work early can save you from the hassle of last-minute entries towards the end of a financial year.

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In the latest episode of Dhan Ki Baat, personal finance guru Gaurav Mashruwala talks about how you can plan your income tax filings better.

It’s almost midway into the first month of the financial year and taxpayers feel they are only left with filing Form 16-A followed by filing of tax.

But taxpayers are prone to the same old mistakes. So what can you do better this financial year?

The burden of filing IT eases if the payee starts planning right from the month of April. By following these simple steps, you will stay calm and composed, while your colleagues wrangle with paperwork.

The first step is to simply ensure a few things. This includes whether your contingency funds are in place and if premiums towards life and health insurance policies have been paid. In addition, it’s also important to plan whether funds for an array of financial goals, if any, will be drawn from fixed deposits or from salary.

The second step deals with action that needs to be taken and this is where the most falter. Firstly, it’s extremely important that changes, if any, in place of residence, or in name and surname arising out of a wedding or otherwise, must reflect in all investment papers – be it mutual funds or a demat account.

Similarly, it’s important to update KYC details and link your Aadhaar number to all necessary services and not leave it for the end of year.

So what are the action plans?

  • Start an SIP in ELSS as soon as possible. This will take care of tax-saving investments and keep all necessary papers ready by the end of year.
  • For short-term goals, a recurring deposit could be a good option.
  • Fixed deposits with a lifespan of five years also provide tax benefits.
  • Those looking to retire must look for mutual funds that are specially designed for them.

If you have an outstanding loan to serve, check the rate of interest first. Most of the time, people already have a fixed deposit that yields 7 percent annual interest and another loan with a 9 percent interest.

Here, funds should be moved from the FD (7 percent interest PA) towards a pre-payment of the existing loan (9 percent interest PA).

Pending credit card bills should be cleared. This will enable you to save more money, thereby creating the opportunity for investments.

Now coming to questions, Mayank Lakhwani, who’s a businessman, says he plans to retire at the age of 55 and wants to know if he should take the SIP route or invest in lump sum.

If you have lump sum, then it’s a better option. In case you don’t, then SIP is the only option. But a comparison between the two isn’t fair. Since you’re a businessman, you must invest a little in SIPs, even if your income isn’t consistent. When big profits come in, you may take some money out of it and invest in a Systematic Transfer Plan.
Gaurav Mashruwala

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