Are you running around looking for various tax-saving investments? Isn’t that the story of every year-end? However, investors often fail to realise that in the quest to invest in various tax saving havens, they often end up putting their money in investments that are not required for their portfolio. In doing so, one is no longer fulfilling the purpose of investing, and rather just spending their hard-money carelessly which they are looking to avoid for the entire year. Most investors often misunderstand or overlook the importance of saving taxes and investing early.
Planning your investments in advance enables you to carefully analyse the options at your disposal and choose the one that best suits your needs. It is essential to understand that early investment in tax-saving avenues will yield more benefits while simultaneously helping you save taxes. Hence, it is logical to plan your taxes, ideally from the start of the financial year itself. But if you have not yet started investmentsfor saving income tax, it is better late than never!
Before we get into why it’s crucial to begin with your tax-saving investments as early as possible, let’s focus on one of the best tax saving options available to investors – ELSS funds. Are you wondering what is ELSS? ELSS or Equity Linked Saving Schemes are simply tax-saving mutual funds that invest in equities and equity-related securities. ELSS mutual funds are eligible for a tax deduction of up to Rs1.5 lakh under Section 80C of the IT Act, 1961.These mutual funds allow an investor to save up to Rs46,800 by investing in these tax saver mutual funds.
Now, let’s focus on why should you invest early:
- Inefficient choice in the last minute
End moment decisions often lead to inefficient investment choices as the investor is often in a hurry not to miss the deadline for filing the taxes for the particular financial year. End moment investments could lead to avoiding choosing consistent investment havens in a hurry. - You can start an SIP
If you don’t have the investment amount right now, SIP has got your back. Systematic Investment Plan (SIP) is a way to invest in mutual funds. Under an SIP plan, an investor invests a specific amount at predetermined periodicity for a given period of time.An investor can invest as low as Rs500 in their desired mutual funds using the SIP route. - The money invested at the beginning of the year works to earn money for the entire year
By investing early, you have put your money to work for you sooner rather than a year. You also give your investments a better chance to grow and increase your capital appreciation as investments for a longer duration are favourable conditions for the compounding to work its magic.
Remember, last-minute investments often go haywire as your decisions are solely compelled by tax-saving motives, overlooking factors that are important to making an investment decision. Happy investing!