Don't be in a hurry to make tax-saving investments; seek professional guidance based on financial goals

This is that time of the year when most salaried individuals rush to make their tax-saving investments. Don’t rush. This is not the perfect approach, as one is prone to make mistakes. Instead, investors should take time to evaluate, seek professional guidance based on their financial goals.

To begin with, it is important to evaluate the various investment and expense options that qualify for tax deduction where one can avail tax benefits. Various tax-saving instruments are available including Equity-Linked Savings Schemes (ELSS) mutual funds, life insurance, health insurance, public provident fund (PPF), National Savings Certificate (NSC), etc., while expenses and outflows can include tuition fees and principal repayment of home loan among others.

ELSS mutual funds

Under Section 80C of the Income Tax Act, one can invest up to Rs 1.5 lakh in tax-saving instrument and ELSS is one of the many options available. The ELSS plans are apt for people who are in their early stages of their career and have the risk appetite to stay invested for a long period of time. One should look at an investment horizon for at least 7 to 10 years. There are several ELSS funds available, choose based on consistency of performance, returns and fund house.

Dont be in a hurry to make tax-saving investments; seek professional guidance based on financial goals

Representational image. Reuters

Health insurance

Under Section 80D, one can claim deduction for the premium paid for self and family. The amount for preventive health check-up is up to Rs 5,000. Health insurance is a boon, when unexpected medical emergencies come up, do not invest to merely save tax, instead seek the best one that suits your needs including your family’s.


Expenses towards medical bills, books and periodicals which form part of the CTC of an individual also qualify for tax claims. House rent is also another component that saves tax. Ensure that you file all your bills/receipts and submit the same on time to avail tax benefits.

Home loans

Buying a home also comes with a tax advantage and you can avail deduction up to Rs 1.5 lakh as per Section 80C limit. Interest amount of the home loan repayment is also subject to tax benefits as per Section 24(b). Buying a home is a long-term commitment, research well, invest in a RERA registered property.

Align your tax-savings plan to financial goals

Include more options in your tax-saving portfolio, so that you spread your risk well. Opt for products such as PPF and NPS along with an ELSS mutual fund. Moreover, one should always make the right choice by identifying the financial goal – medium or long-term. Diversification is the key here.

Tax planning is a must but a mechanical approach will not help. A robust tax plan creates wealth in the long-term and also helps face challenging financial situations. Importantly, the final choice of the investor for choosing a tax-saving instrument depends upon various factors like risk profile, the kind of tax-saving instrument which can be linked to a specific goal, tenure, and the taxability status.

So make an informed decision with the help of your financial advisor. Wish you all the best in your tax planning journey.

(The writer is MD, Tata Capital Financial Services)



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Updated Date: Jan 22, 2019 09:54:00 IST

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