Most people wait till the last moment to start their tax-saving efforts. Every year during the last quarter of the financial year, we see people scrambling to save taxes.
The last-minute rush often leads to hasty decision making and as we all know no good comes from rushed decision making especially when it comes to finances. With a little extra care and time, tax savings can get much easier.
Almost every Financial Advisor will suggest focussing on your tax saving efforts at the beginning of the financial year. Like the famous proverb, “the early bird, gets the worm”. Planning your tax-saving investments at the beginning of the financial year has a number of advantages.
1. Build a healthy investing habit
To start with, planning and staying true to a monthly investment regime will inculcate a healthy investing habit. Instead of diving head-first into the world of investing, you’ll get the time to get acclimated to the ins and outs of the market.
Furthermore, if you opt for a Systematic Investment Plan (SIP), the tax-saving investment will get divided over a period of twelve months.
2. Avoid hasty investment decisions
Getting a head start in you Tax-Saving investments will ensure that you don’t suddenly find your bank balance fall. Furthermore, in case you have second thoughts about your investment and are feeling unsatisfied by its performance, you can course correct your investment at any time through the year
3. Take advantage of the “Magic of Compounding.”
The “Magic of Compounding”, this is a special little secret sauce most veteran investors use. With a Systematic Investment Plan (SIP), the principal amount of your investment is not just growing through the addition of each instalment; the interest added also gets compounded.
In essence, it will earn higher returns since it has been given more time to mature.
4. Rupee Cost Averaging
The equity market is known for its ups and downs. The odds of staying ahead of the market is quite like the odds that were stacked against Luke Skywalker when he tried to shoot down the Death Star, near impossible. However, with a SIP you can stagger your investment over the year and average out the cost of purchase.
5. Seamless Tax Return filing
The filing of returns is the most cumbersome task a taxpayer has to go through in a financial year. By mapping your tax saving plan early and executing efficiently, you are already prepared.
You’ve got all your papers and documents in order, and so the process of filing returns becomes easy.
So don’t wait till the last minute to start on your tax-saving. Create a flexible and easy-to-achieve investing plan and set out on your Tax-Saving journey now!