Friday, December 14, 2012

Lies in the Tax Planning Session

We are into last month of the year, and people will soon start thinking about tax. In this month and in the first quarter of next year, we can see lot of seminars, articles on newspapers and magazines, speeches flooded everywhere. Ideally, the best time to start tax planning was last April, start of the last finance year. All these magazines should publish articles on tax planning during last April. So that people can join to Mutual Fund Systematic Investment Plans (SIP), Public Provident Funds (PPF), or even to insurance plans and keep on investing the entire year. But now we need to invest all money altogether. Some private employers will collect the investment proof to avoid TDS in December itself. So, we need to invest Rs 100,000 now to get full advantage of 80C.

People who are lucky to have Rs 100,000 in their Savings Accounts are lucky species. They can comfortably invest for tax saving. For others, what can we do now? Get personal loans? Go for Gold Loans? I have seen people are doing all these. If you have no money to invest for tax saving, just be a happy tax payer. I know losing a major part of your salary is painful. But, suffer that for long term advantage and promise to yourself that you will not repeat this again. Repeat what? Ignoring tax planning the entire year. Next year, start tax planning from April itself.

By the way, can we blame all publications for not reminding us about tax planning during the start of financial year? No. They publish what readers want to read. If they publish tax articles on April, who is going to read? We dig the well only when we are thirsty.

These thoughts came to my mind when I went for a tax planning session recently. That session turned out to be a canvassing by an LIC agent. The trainer quickly touched Home Loans and PPF to make it a tax planning session rather than an LIC session, and soon reached to his favorite LIC policies.

I am listing out some of the lies he shared in the session.
  • Home loans are the best investment method, because it saves tax and real estate will always appreciate.
  • Gold prices will never come down, so it is the safe investment.
  • Never go for term insurance, you will not get any maturity benefits.
  • Always go for LIC for insurance, because India Government is the guarantor for your investment in LIC.
  • Income from Mutural Funds are taxable even if you sell after holding one year.
  • Types of insurances - Money Back, Endowment and ULIPS. (Like any insurance agent, he will not speak about term insurance unless asked)
  • Money back insurance policy is the best investment method (it contradicts with first point). If you join 5 policies regularly for next five years (one policy this year, another one next year, etc). So after five years the money back paid by first policy can be used to pay other policies. 
  • Finally, the biggest one. Insurance and investment are same, so you can mix both.
I am not going to explain why I call these lies. Research and find out by yourself, if you want to. Or simply believe these and invest your money in endowment policies, money backs, ULIPS, wherever you like. After all, it is your money.You can do whatever you want with it.

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