GURUSPEAK Pick wisely, save early to benefit

In India, when it comes to tax planning, a wide diversity is observed. On one hand, most of the rich people have consultants to take care of their tax planning needs, while a large number of not-so-rich ones are hardly serious about it. Each year, a majority of the tax-paying population suddenly wakes up during the last few weeks of March and dumps money into some taxsaving instruments, as told by some X or Y, most claiming to be advisors.      Often these people invest in an asset class, such as real estate, where tax savings is not that great. Some of the highly paid knowledge workers don't even have the time to think about taxes, leave alone plan for it. They just leave it to their employer — they don't even look at their salary slips to see how much tax is being deducted every month. For double-income families, tax planning is still more important as it can save a decent amount every year.     While saving for tax, you can take care of your portfolio allocation as well by giving a decent allocation to equity, debt and real estate in your investments. For example, there is no long term capital gains tax in India for equity-related investments. Hence, you can save in equity-oriented mutual funds for your long-term needs, such as a child's education, marriage and retirement. When the goals are reached, you could withdraw the amount without paying any tax and utilize the same for achieving your goals.      Instead of renting a house, you may buy one, live and save taxes on the interest and principal paid. If you are a conservative investor or going to retire pretty soon, then you may look at tax-free bonds that are offered by government companies such as IRFC and NHAI. On a pre-tax basis, these bonds offer highly attractive rates (11%-plus per annum), and come with a sovereign guarantee.      Conservative investors who want an assured return for their kids' college fund  could invest in deep discount bonds offered by institutions such as NABARD in their kids' names. When they become a major, the fund is taxed in the hands of the children — at which point of time the tax would most likely be nil, because, in all likelihood, he or she won't have any income then.      Similarly, a part of the retirement planning could be done effectively through PPF by way of tax free withdrawals, while continuing to invest in PPF.      From this year, you could save taxes when you pay for your health check-up. For youngsters, first utilize your 80C benefits and other direct saving options. Then go ahead and identify your goals and appropriate vehicles for investing for the same.      Many small and medium business owners take it lightly when it comes to tax planning. Make sure you plan and budget your expenses and investments well in advance to have some more money in your pocket. Although the first quarter of this financial year has passed, it is still not too late to plan your taxes. Go ahead and do it yourself if you have enough financial knowledge. If not, outsource it to someone who is an expert in this field: May be a financial advisor, a planner or a professional tax consultant.      The author is director of      Chennai-based Prakala      Wealth Management DON'T WAKE UP LATE