Dreams cost money. Whether it’s the next car you’re planning to buy, the next vacation or a stress-free retirement plan, you need to think about balancing your expenses against your income right from the start. So, here’s how you maximise your savings, in easy steps.
1) Invest in the right instruments:
You could invest in a recurring or fixed deposit, but there are other options that offer better returns. You can invest your money in mutual funds. For a short-term goal, park your money in a debt fund. Opt for equity funds for a long-term goal. For the medium term, choose a mix of debt and equity funds.
2) Use tax saving instruments:
Tax-saving investments offer an investment option, and also reduce your taxable income. Public Provident Fund (PPF), National Pension Scheme (NPS), five-year tax-saving fixed deposits, equity-linked savings schemes (ELSS), unit-linked insurance plans (ULIPs), life insurance, etc, all help you save on income tax under section 80C of the Income-tax Act. You could also save on taxes by negotiating with your employer for a tax-friendly salary structure. Some of the items in your salary that can be restructured to maximise tax saving benefits include Employee Provident Fund, House Rent Allowance, Leave Travel Allowance and Children’s Education Allowance.
3) Savings on capital gains:
Reduce your net taxable capital gains. For example , holding on to your equity investments for a year will result in your gains being taxed at 10% instead of 15% — with an added bonus of the first Rs 1 lakh in gains being completely tax-free. For other assets, you also stand to benefit from indexation advantages.
HIGHER SAVINGS
- Choose higher yielding instruments
- Reduce net taxable capital gains
The writer is co-founder & CEO, Clearfunds.com
