Couple Mistakes in Investment: Below are some common mistakes that couples make which should be avoided.
Couple Mistakes in Investment: On the occasion of Valentine’s Day, together with your spouse, you can consider some of the mistakes that couples usually make. Some couples choose the most easily available tax-saving investment or completely ignore any tax planning which leads to regret later. In such a situation, information is being given below about some such common mistakes that couples make which should be avoided.
Delay or Ignore Tax Saving Investments
Many people feel that it is not a good idea to trap big capital to save small tax amount. However, such people do not realize that the same savings will become a huge amount over a period of time. Apart from this, some people consider tax saving as an annual custom and invest a lot in the last few months of the financial year. However, there is a fear of the month’s budget going out of control. The way to avoid this is to systematically invest in Tax Saving Fund or Public Provident Fund (PPF) or National Pension System (NPS).
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investing in insurance plans
Most of the people make the common mistake of investing in an insurance plan by treating it as an investment instrument. One of the major reasons for this is that some financial advisors think of their commissions above the returns of their clients and they give suggestions in which they get more commission. Investing in such instruments is not effective in fighting inflation. Instead, one should invest his money in tax saving mutual funds or PPF.
Investing in taxable options on maturity
Tax saving fixed deposits have the attractiveness of investing in 5 years instruments or National Savings Certificates (NSCs), which offer immediate tax benefits but returns are taxable on maturity. The worst part is that the interest earned on these is taxed as per the income tax slab of the taxpayer. Most of the people ignore the fact that the interest rate on tax saving FD is less than the interest rate on normal FD.
Interest rates are increasing again on FD, but instead of investing in haste, adopt this strategy, returns will increase
Mismatched Financial Goals and Tax Planning
Tax planning is a very difficult task without keeping the long term goals in mind. Tax planning helps in diversifying the portfolio. If your portfolio consists largely of equity instruments, then tax planning should be inclined towards fixed income capital protection instruments. If there are more debt instruments in the portfolio, then tax saving mutual funds can be considered.
Not availing exemptions and deductions
There are many exemptions and deductions available on savings under the Income Tax Act. However, due to lack of information, many people miss it. Most people avail savings under Section 80C with a limit of Rs 1.5 lakh and cover interest on home loan, health insurance premium, medical expenses and donations. Apart from this, benefits are also available under section 80D, 80E and section 24, which some people ignore.
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additional plan
Some people invest more than a limit to save in tax saving instruments. However, it needs to be understood here that tax planning instruments may not be the best return generating instruments. By investing more than the prescribed limit in such instruments, they are not going to get any additional benefit, rather they are trapping their capital which can be smartly invested in other options and get higher returns.
,Article: Vikas Singhania, CEO, TradeSmart and Neha Singhania, CPO, TradeSmart)
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