It’s okay to pay income tax

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As we inch closer towards 31 March i.e. end of the financial year, there’s a lot of hype about tax-saving. Driven by the eagerness to save taxes, many of us make poor decisions that bleed us financially. Investments are linked to financial goals, and investing just to saving tax shouldn’t be your goal. So, don’t take the tax-saving bait. If an investment option, that serves your goal is tax-efficient, it is a good thing. But if you are prioritizing tax-saving over your financial goals, you are chasing a mirage.

Understand the product You may also come across ‘experts’ who are willing to give you free advice on how you should ‘invest’ your money and recommend you the ‘best’ tax-saving investments. Millions still invest in Ulips just to save tax, thinking that it is just a 5-year thing. Millions still choose money-back life insurance policies to build a financial corpus. Looking at insurance as a tax-saving investment is an incorrect and unfair approach.

Personal finance and Personal needs Personal finance is about assessing personal needs. Public Provident Fund (PPF) is considered to be one of the best debt instruments since it has the sovereign backing of the government. Investments made up to Rs 1.5 lakh under PPF can also be claimed as deduction under section 80C. But the lock-in period of your investments is 15 years, which makes it suitable only for long-term investors. If you invest in PPF, you won’t be able to liquidate your money before 15-years, which won’t sync in with the financial needs of a short-term investor.

Claiming PPF to be the best tax-saving investment option won’t be wrong, provided it aligns with your long-term goals. If it honours the time that you want to put in, it is one of the safest options to go for. Financial needs and goals vary from individual to individual. What works best for Mr. Gupta, may not work out for Mr. Kapoor.

It’s okay to pay tax Contrary to the common belief, it is absolutely fine to pay tax and not run behind making random investments in order to save a little here and there. In the last-minute rush, most of us tend to overdo tax-planning and end up making poor investment decisions. A year later or two, we realise these mistakes, pull out prematurely, and end up losing money. So, it’s okay to pay tax instead of making poor choices. Every rupee you invest must meet your financial goal. Make an informed decision on the basis of your tax liability, returns, liquidity, flexibility and risk appetite.