Mar 14, 2013, 01.52 PM | Source: CNBC-TV18
In an interview to CNBC-TV18, Sumeet Vaid of Freedom Financial Planners shared his reading and outlook on tax planning.
Sumeet Vaid (more)
Founder & CEO, Ffreedom Financial Planners | Capital Expertise: Mutual Funds
Below is the verbatim transcript of an interview aired on CNBC-TV18.
Q: Most employed professionals will be rushing now to submit their 80CC investments in the next few days, any advice on what not to do in the garb of tax planning?
A: It is so striking that most of the time the last rush tax planning investments is so pathetic that while doing financial planning with lot of families we get to see many people end up just investing in insurances and some of the 80CC products to take tax advantage without even worrying about principal, which is completely a wrong way of doing thing. If somebody is trying to invest Rs 1 lakh to save 30 percent tax on the 80C but he is not interested to understand what will happen to the Rs 1 lakh. He is more interested in saving that 30 percent. As a result of which many of the families end up buying new insurance policies every year.
So, first thing which we like to advice is when one does tax planning, it should not be at the last minute. One should start at the beginning. The second thing which one need to do is that tax planning in itself is not a goal or objective. It is one of the features, which a scheme should offer. It should fit into a bigger perspective or a financial need of the family. One has a goal for education, goal for retirement and within that if one is buying an investment product for a certain time period that should give a tax planning feature rather than it only having a tax planning kind of a thing in itself.
Insurance is one of the biggest, most popular taxes saving instrument, which is not a right way to look at it. One should never invest in an insurance to save tax. One should buy insurance. So, adequacy of insurance cover is very importantly. In today’s era where risks are increasing, families do not have adequate covers because they end up investing in insurance, paying huge premium, getting very less sum insured. So, insurance is important till the time its term insurance and it’s adequately covered. There are other features like health insurance and few of the other things.
The first message is to have a financial plan, within that have goals and within the goals, fit the instruments. Do not have a last minute rush to get tax planning of 20-30 percent tax rebate.