Tax planning is a seasonal phenomenon in India. Individuals take interest in tax planning only in the last quarter of the financial year. Tax planning is neglected for the whole year and there is a rush to do the same in the last quarter which leads to incorrect decision making. Individuals under the impression of saving taxes are ready to invest in any instrument suggested by their advisor. Lot of advisors tend to suggest instruments which earn them huge commissions without thinking about the investor. Here, the investor invest in the product with the intention to save taxes but eventually comes to know that the product is not at all worth the money, the notional loss of investing in these products is lot higher than the taxes saved by them. People should consult a professional before investing in any of such products. Tax planning is a part of investment planning. Tax planning should not be done without considering its effect on the financial portfolio. Investment in tax saver mutual funds is a very popular and one of the best way to save taxes as well as invest. Another way to save taxes is opening a PPF account, 15 years lock in period is the only disadvantage in case of a PPF account. Buying a term plan is another good option of saving taxes, buying an insurance should not be mistaken as an investment, a term plan should be considered only as an expense. A person can also consider buying a traditional plan to save taxes, but the same should be done only if it positively affects your financial portfolio. In conclusion, tax saving should not be done at the cost of making huge notional losses or just for the sake of doing it.
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