This is the season for saving taxes. Half of all Insurance policies sold and tax saving investments made are in January, February and March – the last 3 months of the financial year.
This frenzy is driven by our deep-rooted aversion to paying taxes. The first investment most people will make is for tax saving. Most of them will invest approximately one month of their salary (a significant amount) to save taxes, without really evaluating their options. Or even stopping to consider what it is that they are really doing.
Tax breaks offered on your investments are not in the nature of a discount or cashback – even though it feels like that. You invest 10,000 and you immediately get a benefit in your salary slip. Instead, they are an incentive for you to prepare for the long term. Just consider the range of investment options that qualify for a tax break: your employee provident fund contribution (meant for retirement) qualifies for it, so does your Public Provident Fund; Life Insurance is supposed to replace your earning capacity for your loved ones, it too qualifies for a tax break; equity funds help you beat inflation over the long term, they figure in the list too.
All of these are long-term investments – preparing you financially for a distant future.
Tax saving investments are an opportunity to start your journey of creating wealth. So please take time to carefully evaluate your options and don’t just save tax – take your first step to create wealth for a secure future.