How to avoid last-minute tax planning mistakes

There are many of us who wait till the last three months of the financial year to start the tax-saving exercise. Taxpayers often commit costly mistakes in a rush to save tax. Find out how to avoid the investing errors you might regret later.

STEP I: CALCULATE HOW MUCH YOU NEED TO SAVE
Add up all the tax-saving investments done till now

Also add these expenses and investments


Find out how much more you need to save

STEP II: NOW CHOOSE AN OPTION BASED ON THESE PARAMETERS

Risk appetite

Returns expected
Safer options give lower returns

Taxability of income
Take tax into account when calculating returns


Liquidity
Some investments offer very low liquidity


Tips for investors

• Keep these points in mind when you invest You have very little time to study investment options in detail. So don’t go for investments that require a multi-year commitment.
• Don’t invest a large sum in equitylinked options such as mutual funds and Ulips at one go. Such investments are best made through monthly SIPs.
• If you don't have time, go for the safest bet: Bank fi xed deposits and NSCs. Returns are low because the interest is taxable but you can’t go wrong.
• Don’t wait till the last day to invest in PPF and Sukanya scheme. Give a margin of 2-3 days for cheque to be credited to the account.

SIPS DO BETTER THAN LUMP SUM INVESTMENTS
It is best not to invest in ELSS funds at one go. Take the SIP route to cut the risk of equity investing.


YOU CAN’T GO WRONG WITH BANK FDs AND NSCs
The interest is fully taxable but there are no charges or multi-year commitments.