Tax Saving Myths

Tax Saving Myths

” Investing for Saving Tax is the biggest myth most of the people in our Country believe in.”

Meet Ramesh, who bought a property because his Tax Consultant told him that it will save his tax. So without looking into the details, his EMI outgo etc. he went ahead and bought that property.

After 3 years now Ramesh wants funds for his business expansion but with Real Estate slowdown and lack of liquidity, he is finding it difficult to sell his property. Now Ramesh is regretting his decision.

One needs to understand that Tax Saving is an additional benefit which you get when you make certain investment or financial decision. But Tax Saving can’t be a driving deciding factor when you make the decision.

As in case of Ramesh – when he was paying an EMI of Rs. 30,000/- per month; he was getting a benefit of Rs. 9,000/- approx (considering 30% Tax Bracket ). So to save Tax of Rs. 9,000 he was paying an EMI of Rs. 30,000/- per month.

There are many people like Ramesh who end up buying unnecessary Investment Policies or other so called Tax Saving Products because of the myth that Tax Saving should be the primary focus of your Investment Decision making.

What you need to do before you Invest:

  • Decide your Goals and Time Horizon.
  • Your Investment Decision should be function of your Goals and not of Tax Saving.
  • Once you are ready with the plan on the basis of your requirement, see where can you optimize by adding Tax Saving Instrument.

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