Everyone wants to save some part of their earnings. People also want to make more money from this remaining money, so they invest this money. At the same time, many people also invest just to get an exemption in Income Tax. If you are also one of those people who invest money just to get tax exemption, then you should know that it also has some disadvantages. Let us know about it and understand how you can do better investment planning.
First of all, understand why to invest
If you are thinking of investing money, then first of all you need to understand why you are making that investment. You have to understand where you want to use that investment money. This is important because there are different types of instruments for different types of investments. At the same time, the lock-in period of these investments may also be different. So before investing, decide what to do with the money.
When should one not invest for tax savings?
If your expenses are high and you are investing money in various schemes just to save tax, then you may have to face a shortage of money. There are many tax saving schemes which have a long lock-in period. In some, you can withdraw money only under very special circumstances, like NPS, PF, and Sukanya Samriddhi. Apart from these, you cannot withdraw money for about 15 years in PPF and for about 5 years in FD. If you break your FD prematurely, you will suffer huge losses. In such a situation, if you need money, you may have to take a loan from somewhere to fulfill it.
If you have a good understanding of the stock market or understand mutual funds well, then you can get huge returns by investing money in them. In mutual funds, you can get returns of up to 15-20 percent, whereas in the stock market, you can make more money with your wisdom. Whereas in tax saving tools you will get only 7-10 percent return. In such a situation, do not invest money just for the sake of saving tax. First, understand what you want to do with the invested money in the future.
What are the tax saving schemes?
At present, there are many tax-saving options available in the market. If we talk about some popular tools, then the Public Provident Fund (PPF), National Pension System (NPS), Sukanya Samriddhi Yojana (SSY), Senior Citizen Saving Scheme (SCSS), Equity Linked Saving Scheme (ELSS) and 5 years tax saving. FD is the most special.
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