In the early Nineties, during my student days, in one of my journeys from New Delhi to Guwahati, I was stranded at the New Jalpaiguri Station for a day. But I was not alone. Thousands of people were with me, stranded in several trains bound for Guwahati and beyond. The trains couldn’t move as there was a bandh called in lower Assam. Initially, I took it sportingly and was busy reading a fiction in the upper birth. But soon, I found myself to be the only passenger left in that second class compartment. It didn’t take much time for the panic to set in and I found myself running out of the station in a bid to get away.
So, I took a bus back to Guwahati, with 86 others and it took me 53 hours to reach home. Unbelievable as it may sound, the bus broke down six times on the road! Later on, one co-passenger from Manipur told me that I was lucky as I had managed to get a seat, whereas he had to share the driver’s cabin with 16 others.
Later on, I found out that many other passengers had made the same journey in much comfort within 14 hours and also by paying a much lesser a price. Needless to say, my group and I had been victims of panic and misinformation. The touts of Siliguri taught me a big lesson in life. In a bus station, there are no last buses to catch. You miss one, another you will catch. The idea is to board the right one.
In my work as an investment professional, I have seen the most miss-selling happening during the last period of March. As panic grips the tax-payee, the unscrupulous agents and distributors hand down the high-cost products to their customers. Let’s find out the last minute mistakes people make. In the tusk of calculating the eligible amount for tax deduction under 80C, people forget to include tuition fees of their children. You are eligible for exemption of tuition fees of upto two children under Section 80C. Simply adding this will lower your amount needed to invest under that section. Advisers seldom tell this to their clients.
Another mistake frequently made is to invest in an ELSS fund in the last minute, in a lump sum amount. I have stated before, that for tax saving, ELSS is the best instrument. They are low on cost, fairly transparent, highly liquid and returns are tax-free. Yet, one should not invest in an equity fund in one go. The only way to invest in an ELSS is through a SIP throughout the year. In a recent study, it has been found that 25 per cent of inflow to ELSS investment comes in the month of the March as lump sum. This tells the magnitude of the problem.
For last minute investment, the PPF option scores the highest. It is the safest bet, and the interests are also tax-free. Last minute investors can also think of NSC or Bank FD as a safe bet to invest for tax-savings. But one must understand that the interest earned from bank FD and post office NSC are not tax-free. Their interest will be clubbed to your income in the year of maturity.
One more obstacle is your adversely friendly insurance agent. What seems to be an easy way to invest becomes a pain for continuous years to come. Agents normally will come to your homes and take your signature and cheque. They normally do the feeling up of the forms, etc. For a moment of easy purchase, customers end up buying a multiple year commitment product and this becomes a drawback in later years, if he/she wants to switch to a new and better product.
Salaried tax-payers are expected to submit their proof of investment by mid-March. But if you have missed the deadline because you are yet to make the investment, then don’t worry. Let your employer deduct the TDS from your March salary. Once you are done with your investments before the end of March 31, you can ask for the refund from the IT department from your TDS deduction, wherever applicable.
-The writer is CEO of EconPenny
