Just about a fortnight into the new fiscal year, financial planning may be the last thing on your mind. Especially, if you are someone who’s catching up on his breath after racing against the March 31 deadline to wrap up tax-saving investments. Still, it may be a good idea to set aside some time for a few essential steps to make your buck go far this financial year and beyond. On money matters, the early bird definitely catches more worms.
Quickly submit your Forms 15G or 15H to banks and other income payers, if you are eligible. Doing this can help you avoid that old bugbear — TDS (tax deducted at source). You can submit these forms if you estimate that based on your overall income, you will have no tax liability for the year. Form 15G is for those under 60, and Form 15H is those aged 60 or more. You can even do this online. Submit these forms, and there will be no TDS on income received on deposits from banks and other payers. Else, tax will be deducted by the payers if the income exceeds specified thresholds and you will get only the balance. You will then have to claim refund of the TDS while filing your tax return. Fresh Form 15G/15H has to be submitted each year. You can even do this online.
In a week or two, your employer will process your salary for April. And like many employers, he/she will deduct tax at source on a monthly basis. This will be based on your estimated taxable salary for the year after taking into account the tax-saving investments that you plan to make over the year. So, make sure you quickly inform the employer about your various tax-saving investments – such as those under Section 80C(PPF, Sukanya Samriddhi Yojana, home loan repayment, life insurance premia, equity-linked savings schemes, etc.). , Section 80D (health insurance premia), Section 80CCD (NPS) and Section 24 (interest on home loans). This will help you get more in your hand right from month one of the financial year.
Also, come to think of it, why stop with the investment declaration? Why not start investing early in the year itself, if you can afford to? It’s not a good idea to let money languish in your savings bank account earning a piddly 4% or less.
Start deploying money, even if in small doses, in various investments, especially tax-saving ones. This has at least two benefits. One, the earlier you start, the longer the money stays invested and the more you earn as income. Never underestimate the power of compounding. For instance, starting your PPF investment a month or two early can give a disproportionate pay-off over the long term — with the interest you earn for the couple of months also earning interest for the entire remaining tenure. Starting the investments early and/or phasing them gradually will help you deploy money to a plan based on your requirements. This will also keep you away from sub-optimal choices that could accompany a last-minute rush.
While investing, keep an eye on some deadlines. For instance, investments in the PPF earn interest for the month, only if deployed on or before the 5th of the month. In the Sukanya Samriddhi Yojana, investments made on or before the 10th earn interest for the month. If you miss these dates, let the month pass; invest in the next month on or before the cut-off date.
Hop, skip and jump, and the tax return filing season will be upon us. Run an early check to confirm that tax payment credits of last year mentioned in your Form 26AS match with the tax payment credits in statements issued by income payers such as your employer. Get discrepancies sorted quickly to avoid hassles while filing returns. For instance, if the credit mentioned in Form 26AS is lower than what the employer mentions in your Form 16 (the salary TDS certificate), it could mean that the employer has not yet deposited the TDS with the tax authorities. Take this up with your employer pronto. Also, make note of additional disclosure requirements in the new tax return forms and get all the paperwork in place.
The start of the financial year is as good a time as any to get the basic building blocks of your investment portfolio in place. To begin with, build a contingency fund (easily accessible money worth six to eight months of expenses) for emergencies, if you don’t have one already. Get adequate life insurance if you have dependants. Cover the health of yourself and your family sufficiently with health insurance. Start goal-based investments.
Make a place for equity investments in your portfolio in your asset allocation (mix of various asset classes such as equity and debt) depending on your specific requirements. Review and rebalance your portfolios, depending on your asset allocation plans. Keep increasing your investment outlay every year. with rise in income levels; add to the mutual fund SIPs. Last, but not the least, prepare your will and update it, if need be.