Under Indian tax laws, savers have a complete range of tax saving instruments like Public Provident Fund (PPF), Tax-saving fixed deposits, National Savings Certificate (NSC), Equity-linked Saving Scheme (ELSS) and others. Yet, individuals often take sub-optimal investment decisions with their tax-saving investments. Why does this happen?

One common reason is that there is a confusion of goals between saving tax and making investments. The typical investor makes this decision either in late March under the duress of having the deadline slip by, or under pressure by a salesperson who drives home the fact that time is running out. The pressure may intensify if the salesperson is a relative or a friend. At the end of the day, we make sub-optimal investment decisions and when we realise the fact later, we console ourselves by saying that at least we got tax benefits for the investments. This approach proves expensive in the long run.

This dual concern prevents clear-headed thinking about just exactly what one is getting out of an investment and whether the quantum of disadvantages are actually worth the quantum of tax benefits that are being obtained. Investors should work on eliminating both these sources of poor decision-making-time pressure as well as not thinking through about these investments. Eliminating time pressure is simple. Just plan these investments as early in the year as possible and once you start in time, there's no need to stop after a year.

For most people, the investment that should make most sense is an ELSS. Salary-earners generally have some of the permitted amount going into fixed income through PF deductions. And, to balance that, equity is advisable. ELSS is unique in being the only viable tax-saving investment within Rs 1.5 lakh limit that brings the benefits of equity returns. Sure, there are two other options that give equity-linked returns - ULIPs and the National Pension System (NPS). However, ULIPs have a longer lock-in period of 5 years, coupled with high costs and poor transparency. The NPS is a retirement solution rather than a savings one. It has only partial exposure to equity and a very long lock-in period that effectively extends till retirement age. There's no way a three year lock-in product like the ELSS can be compared to the NPS.

For many beginner investors, it makes an excellent gateway product in which they get the first taste of equity investing and of mutual funds. You end up investing in these funds because the tax-saving attracts you and it has the shortest lock-in. This experience encourages investors to invest in equity mutual funds over and above their tax-saving needs. Once you get used to long-term equity returns, you end up trying other types of equity investments as well.

Equity investment carry higher risk over the short-term. However, for investment periods of five years or more, the risk on equity investments is considerably lower. When you take inflation into account, bank FDs and similar deposits turn out to be sub-optimal because of inflation. Like all equity investments, the best way of investing in an ELSS is through monthly SIPs throughout the year. SIP also gives the dual advantage of avoiding any last minute rush. At the beginning of every year, estimate the amount you have left over from the Rs 1.5 lakh limit after statutory deductions, divide it by 12 and start an SIP. Simple.

Useful, simple to understand and easy to execute. Those should be the qualities that your first fund investments should have.

For beginners, these requirements are generally best satisfied by tax-saving funds or balanced funds. Here's why. When you start investing in mutual funds, it makes sense to invest in a fund that invests mostly in equity. The reason for this is that you are likely to have no equity investments at all. Investors at an early stage of their investing life generally have bank deposits, PPF and other fixed-income investments. Since equity is the best form of long-term investment, and mutual funds the easiest and safest way to invest in equity, it follows that the type of fund you choose must be an equity fund. There are two types of funds that are uniquely suitable as beginners' funds. These are Tax-Saving Funds and Balanced Funds.

Tax Savings Funds: Tax saving funds are also called ELSS funds as their formal name in the tax law is Equity-Linked Savings Scheme. They are basically all-equity funds, investments in which are eligible for tax exemptions under Section 80C of the Income Tax Act. Under Section 80C, you can invest up to Rs. 1.5 lakh in a set of investments, one of which is ELSS funds. Since they are equity funds, one should invest in them for long-term. This long-term imperative is compulsorily enforced because under the tax laws, investments made into these funds are locked in for at least three years. Because of this lock-in, investors tend to have a good experience of getting reasonable returns from these funds. Moreover, the tax-break acts as a natural boost to returns.

Balanced Funds: Balanced funds, also called hybrid funds combine equity and debt investments in a certain ratio. In order to maintain this ratio, the fund manager will typically disinvest from holdings that have gained more and invest in holdings that have gained less. This, of course, is asset rebalancing.

Effectively, the gains that are made in equity are protected by debt. The great advantage of balanced funds is that they are inherently safer than pure equity funds. They gain well when the markets gain but when the markets fall, they fall less sharply, thus protecting the gains that were made in the good times.

Your first step towards successful investmenting starts with taking stock of your finances. You should first know your income, expenses, liabilities, savings. Sure, you know all these things somewhat, but that is not enough. You should be absolutely clear about these things.

Boosting your savings is key to creating more money to invest. That is why you should closely examine your expenses, especially discretionary expenses, and figure out how you can cut down on them. Similarly, you should also closely examine your liabilities to figure out the cost involved in servicing them. For example, if you have a huge credit card outstanding, you should first clear that off. This is because it doesn't make sense to pay 40 per cent interest on a credit card loan and earning 12 per cent returns on your investments.

First, buy a health cover for you and family. Two, buy a term life insurance cover if you have financial dependants. Three, create a contingency fund that will cover your expenses of at least six months. These steps will ensure that no unforeseen events will derail your investment plans.

Next, try to find out answers to these questions.

1. What are your financial goals?
2. What is your investment horizon?
3. What kind of investments should you make?
4. How much money should you invest?

Don't try to be evasive while answering these questions. If you don't clearly spell out various goals and how much money you would require, you are unlikely to achieve them. This is because a forgotten goal can have a cascading impact on your other investment programme. Similarly, it is also very crucial to get the investment horizon and instruments right.

Here is an example of how to do it:

Goal: Rs. 5 lakh for a foreign holiday

Time: Five to seven years

Instrument: Equity

How much can you invest: Rs. 10,000 per month?

Quickly open the excel sheet and use the FV or Future Value formula to find out whether you would be able to be achieve the goal. Well, if the investment gives an annual return of 12 per cent per annum, the you would be able to create a corpus of Rs. 8 lakh in five years.

Youth is the time when one wishes to remain carefree and enjoy life to the hilt.

But, it is also the time when sensible decisions related to life and making sound future plans can help to have a comfortable life later on. In order to build lifelong wealth, one must start investing in early twenties only.

If you don't invest in early years, you are missing out on opportunities to increase your financial worth in the later years of life. Money multiplies over the years, and more the number of years you put in, more the returns.

Here are 8 BIG reasons why you should invest your money in your early twenties!

1. You Seed Your Money At The Right Time

Yesterday was the best day to start your investments. If you missed it, you should start your investments today. Delay it further only if you want to forgo some extra returns.

Don't worry too much about getting everything right. If you are following the basic rules, you will definitely get it right. It is quite usual for you to feel a bit nervous when you are investing in unfamiliar instruments for the first time. But you will learn on the way. So, don't let your nervousness delay your investments further.

As said before, always try to match your investment horizon with your investment choice. This will help you eliminate unwanted choices, and identify the right ones. It will also save you a lot of headache later. As a rule, avoid risky investments like stocks, equity mutual funds for short-term goals. This is because equity can be extremely risky and volatile in the short-term. You should try to preserve your capital and try to secure stable returns for short-term needs. However, if you have time in hand, you can be a little adventurous and invest in equity. It will help you earn a few extra percentages. This is because equity has the potential to offer superior returns than any other asset class over a long period of time.

Don't forget to review your investments periodically. Investing and forgetting all about it is not a great strategy. You should regularly check how your investments have done over a period of time. Always compare the performance of a mutual fund of your choice with its peers and the relevant benchmark. If you find that the performance is not up to the mark, put it in a watch list. Track it for the next few months and try to find out the reason for its underperformance. If you find reasons to believe that it is not going to bounce back again, sell it. There is no point in continuing with a bad investment because it robs you a chance to make more money elsewhere.

You should also sell your risky investments at least two years before your goal and park the proceeds in a safe avenue. This is to ensure that you have the money safely parked somewhere when you need it.

Why should you invest? The answer is very simple: to create wealth. And why would you want to create wealth? Well, to fund various financial goals you may have in your life like an expensive TV, foreign holiday, retirement, and so on.

The trouble is that most of us have a single source of income and there are various needs that are immediate, medium term and long term. If we move from one goal to the other with our accumulated savings, we would be left with almost nothing for our long-term goals. This is why it is important to not just keep money in the savings bank, but use it to make investments that will help you create wealth over a long period of time.

If you start your investments as early as possible, you will be in for a pleasant surprise. This is because time and compounding interests are a lethal combination that will multiply your wealth beyond your imagination over a long period of time.

Consider this example: Ram and Shyam are friends, both are 30 years of age. Ram invests Rs. 1,000 every month for his retirement. He manages an annual return of 12 per cent on his investments and succeeds in amassing a neat corpus of a little over Rs. 35 lakh at the end of 30 years. Shyam does nothing for 20 years. He suddenly wakes up 10 years before his retirement and starts investing Rs. 12,000 every month for the next 10 years. He also manages to pocket an annual return of 12 per cent on his investment. However, at the end of the exercise, Shyam managed to create only around Rs. 27 lakh for his retirement.

How is it possible? Ram was investing a measly Rs. 1,000 whereas Shyam was investing Rs. 12,000 every month. Well, it is possible because of the compounding interest. Some people call the eight wonder of the world because of its power to multiply money over a long period. If you invest in a disciplined manner and give your investments plenty of time, you can achieve most of your goals without much pain. For some academic interest, how much do you think Shyam will have to invest to create a corpus of Rs. 35 lakh? Well, he will have to invest around Rs. 15,000 per month for 10 years to create that kind of corpus.

If you are still not inspired enough to start your investment plan right away, here is a quick list of habits that stops you from being rich.

Waiting for the perfect plan: Spending months or years to come up with a fool-proof investment plan is not a great idea. There is no guarantee that your perfect plan indeed is going to be perfect. So, start right away.

Starting late: It is extremely difficult or almost impossible to catch up with someone who has started investing regularly much earlier. Even with a very large investment, you would find it difficult to catch up. Once again, start now.

Investing for short-term: Try to think beyond a few months or a year. You think of short-term investments only when you have short-term goals. Long-term goals need long-term investments. The basic rule: stick to debt investments for goals that are below three years. Invest in equity if your goal is five years away or longer.

Playing it safe: You can't build a large corpus with small investments in debt schemes. If you want anything substantial over inflation, you should invest in stocks. Get rid of the fear of stocks and invest in stocks for your long-term goals.

Looking for tips: Don't waste time looking for tips to get rich quick. Most of these tips would do exactly the opposite: rob you a chance of making money on your investments. If you have your basics right, shut out all the noise and stick to your plan. Take our word for it: you will be rich one day.

Trading is not investing: Getting in and out of investments, especially equity investments, is not a great idea. You will end up paying higher taxes on such frequent sale and purchases. It will also rob you a chance to make spectacular returns from your investments over a long period. Giving time to your investments is the key to creating wealth over a long period.

What you need to get started with Mutual Fund investing?
To start investing in a fund scheme you need a PAN, bank account and be KYC (know your client) compliant. The bank account should be in the name of the investor with the Magnetic Ink Character Recognition (MICR) and Indian Financial System Code (IFSC) details. These details are mentioned on every cheque leaf and it is common for an agent or distributor to seek a cancelled bank cheque leaf.

How to get your KYC?
The need for KYC is to comply with the market regulator SEBI in accordance with the Prevention of Money laundering Act, 2002 ('PMLA'), which undergo changes from time to time.

KYC process is investor friendly and is uniform across various SEBI regulated intermediaries in the securities market such as Mutual Funds, Portfolio Managers, Depository Participants, Stock Brokers, Venture Capital Funds, Collective Investment Schemes and others. This way, a single KYC eliminates duplication of the KYC process across these intermediaries and makes investing more investor friendly.

Documents required to be submitted along with KYC application

• Recent passport size photograph
• Proof of identity such as a copy of PAN card or UID (Aadhaar) or passport or voter ID or driving licence
• Proof of address passport or driving license or ration card or registered lease/sale agreement of residence or latest bank A/C statement or passbook or latest telephone bill (only landline) or latest electricity bill or latest gas bill, which are not older than three months.

You will need to submit copies of all these documents by self-attesting them along with originals for verification. In case the original of any document is not produced for verification, then the copies should be properly attested by entities authorised for attesting the documents. In case you are unable to furnish proper documents, it could result in delays in getting a KYC.

Resident Indians can get it attested by: Notary public, Gazetted officer, Manager of a scheduled commercial or co-operative bank or multinational foreign banks. Make sure the name, designation and seal is affixed on the copy.

NRIs can get attestation from: Authorised officials of overseas branches of scheduled commercial banks registered in India, notary public, court magistrate, judge, Indian Embassy in the country where the client resides.

How to check your KYC status?
Existing investors and those who have submitted their applications can check the status on KYC compliance with their PAN number with any of the KYC Registration agency

• https://www.cvlkra.com/
• https://kra.ndml.in/
• https://www.nsekra.com/
• https://camskra.com/
• https://www.karvykra.com/

Mutual fund application form
Each mutual fund scheme has a form that investors need to fill. If you start investing in the systematic investment plan (SIP), you need to fill in two forms: one to open an account with the mutual fund and the other to specify your SIP details such as frequency, monthly instalment amount, and date on which the SIP sum is to be invested.

Investing for Minors
If you wish to invest in the name of a minor, you need to fill in a third-party declaration form.

• Only parents are allowed to invest on behalf of their children
• Documents that establish the parent's relationship with the child should be submitted (Passport, birth certificate or any other ID proof)
• If the child has no parents in case of an eventuality, then a court-appointed guardian can invest if necessary documentary proof is submitted to establish the relationship between the minor child and the guardian

Growth, Dividend or Dividend Re-investment
When investing in mutual funds, there are three options that are available in which you could invest: growth, dividend and dividend reinvestment. One is normally expected to select one of the three options when filling an investment form, however, in case if you do not fill any of the option, the fund house selects the default option for the scheme as mentioned in its Scheme Information Document (SID), which is most often the growth option. Investors have the flexibility to change the investment option at a later date to suit their convenience.

Growth option: In this option, the scheme does not pay any dividend, but continues to grow. Therefore, nothing is received by you as a unit holder and hence, there is nothing to reinvest in the scheme. Any gains made by selling the fund holdings are invested back into the scheme, which can be seen in the NAV (net asset value) of the scheme, which rises over time. But, the number of units with the investor remains the same.

Dividend payout: In this option, the mutual fund scheme pays you from the profits made by the scheme at regular periods which could be monthly, quarterly, half-yearly or yearly in case of debt funds and at irregular intervals in case of equity funds. A liquid fund also provides for a daily or weekly dividend option. However, you should be aware that dividends are not guaranteed, which means a fund is not bound to pay out a dividend; it may or may not pay a dividend.

Dividend reinvestment: In this option, the dividend is not paid to you, instead it is reinvested in the fund scheme itself by buying more units on your behalf.

Each of the three options has its share of pros and cons, which will vary depending on your needs. As investors, the treatment of gains and taxes are the two essential features that differentiate these options. If evaluating the returns from an investment at a point of time, there is no difference among the three options. The difference emerges in an implicit form with respect to the applicable taxes.

Further, it is important to consider the tax impact when selecting between the growth, dividend payout or dividend reinvestment options as the post-tax returns' differs between the options. This difference occurs because, the tax treatment is different for long-term and short-term holding period. The tax treatment also differs for equity and debt funds.

Where and how to buy funds?
Like the many mutual fund schemes to choose from, there are several ways in which one can invest in them. One can invest online or offline or in direct as well as regular plans. Like everything else, each option has its limitations and advantages, which vary for each investor.

Direct Plan: Since January 1, 2013, all mutual fund houses have rolled out a new plan under all of their existing fund schemes-the Direct Plan. These plans are targeted at investors who do not make their mutual fund investments through distributors and hence have a lower expense ratio compared to existing fund schemes of the AMC.

This means that you, as an investor, will get an opportunity to earn a slightly higher return from your mutual fund despite it having the same portfolio. The direct plans will not charge distribution expenses or commission, resulting in these plans having lower annual charges and eventually, a different (higher) NAV compared to the regular plans.

Through intermediaries: There is a wide variety of intermediaries available. These include most banks, distribution companies having national or regional presence, some stock brokers (including online brokers) and a large number of individuals and small financial advisory companies. All intermediaries have to be registered with the Association of Mutual Fund in India (AMFI), which also maintains a searchable online directory at www.amfiindia.com. The website also lists intermediaries who have been suspended for malpractice to protect investors from going back to them.

The intermediary, normally brings the required mutual fund application form, helps you fill the forms, submit the forms and other documents to the Mutual Fund office and sometimes even brings in the Account Statement. But, all these services come to you for a fee. Typically, agents charge a flat fee for these services.

Through IFAs: IFAs are independent Financial Advisors, who are individuals who act as agents to facilitate a mutual fund investment. They help you fill the application form and also submit the same with the AMC.

Directly with the AMC: You can invest in a mutual fund scheme by investing directly through the AMC. The first time you invest in any Mutual Fund, you may have to go to the AMC's office to make your investment. Subsequently, future investments in different fund schemes of the same AMC can be made online (provided this facility is offered by the AMC) or offline, using the folio number in your name. Some AMCs may extend the facility of sending an agent to help you fill the application form, collect the cheque and send the acknowledgement.

Through Online Portals: There are several third party online portals, from where you can invest in various mutual fund schemes across AMCs. Most of the portals have tie-ups with banks to facilitate easy fund transfer at the time of investing. These portals charge an initial fee to setup an account and facilitate future smooth online access to invest and redeem your investments.

Through your bank: Banks are also intermediaries who distribute fund schemes of different AMCs. You can invest directly at your bank branch into fund schemes that you wish to invest in.

Through Demat and Online Trading Account: If you have a demat account, you can buy and sell mutual funds schemes through this account.

Electronic Money Transfer
The traditional way to transfer money from one bank account to another is to write a cheque and then deposit it. The advent of technology has ensured that one need not go through such a tedious process anymore. Over the years, the RBI has introduced several steps that has resulted in paperless transfer of funds through electronic funds transfer (EFT). There are several other acronyms that one comes across, especially when transferring funds online or through electronic clearances such as RTGS, NEFT, IMPS and ECS. Each of these plays an important role in ensuring your investments are timely and you do not lose time when investing. Each of these options plays a role in the way your investments are treated in a mutual fund.

Electronic Clearing Service (ECS): ECS is an electronic mode of payment or receipt for transactions that are repetitive and periodic in nature. For this reason, ECS is most preferred and useful when investing through SIP. Essentially, ECS facilitates bulk transfer of money from one bank account to many bank accounts or vice versa.

Primarily, there are two variants of ECS-ECS Credit and ECS Debit. ECS Credit is used by an institution for affording credit to a large number of beneficiaries having accounts with bank branches at various locations within the jurisdiction of a ECS Centre by raising a single debit to the bank account of the user institution. ECS Credit enables payment of amounts towards distribution of dividend, interest, salary, pension, etc., of the user institution.

ECS Debit is used by an institution for raising debits to a large number of accounts maintained with bank branches at various locations within the jurisdiction of an ECS Centre for single credit to the bank account of the user institution. ECS Debit is useful for payment of mutual fund SIPs, because these are periodic or repetitive in nature and payable to the user institution by large number of investors.

National Electronic Fund Transfer (NEFT): This is a nationwide payment system facilitating one-to-one funds transfer. Under this scheme, individuals, firms and corporate can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme. Individuals who do not have a bank account (walk-in customers) can also deposit cash (up to R50,000) at the NEFT-enabled branches with instructions to transfer funds using NEFT. At present, NEFT operates in hourly batches - there are twelve settlements from 8 AM to 7 PM on weekdays and six settlements from 8 AM to 1 PM on working Saturdays.

Electronic Funds Transfer (EFT): This is a paperless method by which money is transferred from one bank account to other bank account without the cheque or currency notes. The transaction is done at bank ATM or using Credit Card or Debit card. In the RBI-EFT system you need to authorise the bank to transfer money from your bank account to other bank account that is called as beneficiary account. Funds transfers using this service can be made from any branch of a bank to any other branch of any bank, both inter-city and intra-city. RBI remains intermediary between the sender's bank called as remitting bank and the receiving bank and affects the transfer of funds. Using this method, funds are credited into the receiver's account either on the same day or within a maximum period of four days, depending upon the time at which the EFT instructions are given and the city in which the beneficiary account is located. Usually the transactions done in first half of the day will get first priority of transfer than the transaction done in second half.

Real Time Gross Settlement (RTGS): The real time gross settlement is an instantaneous funds-transfer system, wherein the money is transferred in real time. With this system you can transfer money to other bank account within two hours. In this system there is a limit that you have to transfer money only above Rs2 lakh and for money below R2222222 lakh transactions, banks are instructed to offer the NEFT facility to their customers. This is because; RTGS is mainly used for high value clearing. The RTGS facility is available only up to 4:30 PM on weekdays and up to 2:00 PM on working Saturdays.

Interbank Mobile Payments Service (IMPS) Facility: IMPS is a platform provided by National Payments Corporation of India (NPCI). IMPS allows existing unit holders to use mobile technology/instruments as a channel for accessing their bank accounts and initiating inter bank fund transaction in a with convenience and in a secured manner. It allows to invest 24*7 via mobile phone.

How does it work?

• Unitholder needs to register for Mobile Banking with his Bank
• The bank issues a unique MMID (Mobile Money Identifier) which is a combination of his bank account and bank code and also issues an M-PIN, a secret password.
• Unitholder can now perform transaction using mobile banking application or SMS / USSD facility as provided by his Bank. For example: If unitholder wants to invest Rs. 10,000 in a mutual fund scheme using the mobile application, he needs to follow the following steps - In the mobile application; provide the
  • MMID of the scheme
  • His Mutual Fund Folio No.
• Amount to Invest/transfer
• MPIN issued by the bank remitting bank validates the details and debits the account of the Unitholder. It passes on the information to the beneficiary party (AMC in this case) via NPCI.
• AMC shall, after validating the details, credit the folio/scheme account with the appropriate units and shall also provide an SMS/email confirmation to the Unitholder informing of the allotment

Unitholder should ensure that the Mobile number registered with Bank for IMPS facility is the same as mobile number registered with Mutual Fund for the folio.

Electronic payments
IFSC or Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to identify the originating or destination banks or branches and also to route the messages appropriately to the concerned banks or branches.

Broadly speaking, your investment choice should be guided by two things: investment horizon and risk appetite. Always remember, your short to medium-term goals should be funded by using safe or relatively-safer debt investments. This is because you cannot afford to lose money when you don't have much time in hand. Always invest in bank deposits and liquid funds for goals that have to be met within a few months or in a year. Use bank deposits and short-term debt schemes to take care of goals that have to be met within a couple of years. And for long-term goals, invest in equity. Long-term is five years or more.

Short-term investment options

Bank deposits: They are the safest and they also offer assured returns. However, the trouble with fixed deposits is that the interest is taxed. Use them only for keeping contingency funds, and money needed in the next few months to a year.

Company deposits: They offer slightly higher returns, but they are also a little more risky. Always stick to higher-rated deposits. Do not compromise on ratings for higher returns. Also, never put your entire investments in a single company, spread your investment across a few companies.

Debt schemes: They no longer have the tax advantage, but they may still offer slightly superior returns. However, use them carefully. Also, you should find out whether it is worth your while. This is because there won't be much difference in returns if the amount involved is small. It is extremely important that your investment horizon should match with the fund. For example, use liquid funds to park money for a few weeks or months. Ultra short-term funds are suitable to park money for a few months to a year. Short-term funds are ideal to park money for a two to three years.

Long-term investment options

Long-term debt schemes: If you have an investment horizon of more than three years, investments in debt schemes still make sense. This is because long-term capital gains from these schemes are taxed at 20 per cent with the indexation benefit, which is beneficial to those in the highest tax bracket.

Equity mutual funds: If you have an investment horizon of five years or longer, you should pick equity mutual fund schemes. If you are looking to save taxes under Section 80 C of the Income Tax Act, pick one or two Equity Linked Savings Scheme (ELSS) or tax planning schemes. If you are a conservative investor new to the market, pick one or two equity-oriented balanced schemes. Balanced schemes invest in a mix of equity (at least 65 per cent) and debt, and they are less volatile than pure equity schemes because the debt portion offers a cushion in times of volatility. Others can pick up one or two diversified equity schemes to fund their long-term needs.

Stocks: Investing directly in stocks can be extremely rewarding, but it is also equllay risky. You should attempt it only if you have a sound knowledge about the working of the stock market. You should also have enough time in hand to pick stocks and monitor them.

Tax saving options

Public Provident Fund: Ideal long-term tax saving option for conservative investors. The contributions to it qualify for tax deductions and interest earned is also tax free.

ELSS or Tax planning mutual funds: The best tax saving option for aggressive investors. They have a mandatory lock-in period of three years, but invest only if can wait for more if the market gets into a bad phase.

Just as rules are important for good living so also there are some golden rules of tax planning. The five simple yet effective golden rules of tax planning are:

1.Spread the taxable income among various members in your family;

2.Take full advantage of tax exemptions available under the law;

3.Take full advantage of permissible tax deductions and rebates available on stipulated tax-saving investments;

4.Make optimum use of tax-exempted incomes; and

5.Simple tax planning is smart tax planning.

Planning your income may or may not be a difficult question to answer but Tax Planning has been something which many people have found out to be very difficult. We rush to our CA's at the end of our financial yeas so that he can guide us as to where can we invest so that we can save maximum amount of tax There are many parameters that we need to take into consideration while planning for our tax as the benefit is going to be received by the government. We will not advise you to skip and not pay your tax because at the end of the whole thing is that who will be the sufferer amongst this it is we and this is a crime to not to pay your tax. But a proper planning is what is required. We have to compare the advantages of several tax saving schemes and depending upon your age, social liabilities, tax slabs and personal preferences, decide upon a right mix of investments, which shall reduce your tax liability to zero or the minimum possible. Every citizen has a fundamental right to avail all the tax incentives provided by the Government. Therefore, through prudent tax planning not only income-tax liability is reduced but also a better future is ensured due to compulsory savings in highly safe Government schemes. We sincerely advise all our readers and clients to plan their investments in such a way, that the post-tax yield is the highest possible keeping in view the basic parameters of safety and liquidity.