Do you need to worry about investments to be done in tax savings beyond 6 years of your career life?
This is a short article and I would be spending little time on a wonderful tip I learnt from my ex-manager.
There was a discussion among the group about investments to be done in income tax saving schemes. I was expressing my concerns about lump sum investments to be done every year till we retire to do tax savings. He laughed at me and said the tip he has followed in first 6 years of the career life and he is not worried after that.
Let us look at the investment strategy he adopted for tax saving.
- He invested ₹70K every year in National Saving certificates in the first 6 years of his career. Yes this was a big amount for him at the beginning of the career. He could able to invest as there were no other obligations.(he was single at that).
- Now the amount he invested for ₹70K in 1st year has matured in 7th year and the maturity amount was ₹1.1 Lac. By the time his tax component also increased and he was forced to save ₹1 Lac (Maximum limit) from that year, else he needs to pay tax.
- Whatever he invested from 1st to 6th year was getting matured from 7th year onwards and he just re-invested ₹. 1 Lac and was getting the tax benefit after this for the rest of the life
Conclusion: The example quoted above is investing the amount in National Saving certificates. We can try even investing in other tax saving schemes every year and forget about lump sum investment after 6 or 7 years of starting the career. I am following similar tip may be with slight modification
Readers, are you adopting any other mechanisms to get rid of this lump sum investments to be done every year for tax savings? Please give your comments
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Suresh
Myinvestmentideas.com
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4 comments
Add a comment ↓Hello Suresh Sir,
Thanks for reply. In elss fund which option is better, lump sum amount or sip?
Hi Vikas, I personally prefer SIP. It is immaterial whether it is ELSS or diverisified fund.
Hi Suresh Sir,
Personally which one is ur favourite option of investment for tax saving?
Vikas, I would prefer to invest in ELSS mutual funds as the lock-in period is 3 years and you can expect high returns if you choose good funds.