Last minute tax planning

Well, last minute tax planning is something which is not advisable. But still, if due to any reason, you are not able to do any tax saving investment for FY 2022-23 till date and 31st March is approaching, here are some quick read points, which can help you:



(1) Always maintain enough liquidity in your bank account in the month of March so that you can immediately transfer the required amount to any of the tax saving instruments. 

(2) Check the status of your current tax saving investments. Calculate the total amount which has already been invested during FY 2022-23 in tax saving instruments like PF, PPF, life insurance premium, children’s schools fees, principle repayment of home loan, etc. Now, you have to worry about only the balancing amount falling short to complete the investment of ₹ 1,50,000/-.

(3) Try to use the existing set up of your tax saving investment. For example, if you already have PPF account, you can quickly transfer the necessary amount to that account and save tax.

(4) Never buy any life insurance policy or health insurance policy at the last moment merely for the purpose of saving tax. The basic purpose of the insurance is risk coverage and not tax saving. And therefore, insurance is something which should not be selected in haste or in haphazard manner. Because, it is not possible to understand all the terms and conditions of the insurance policy within short time.

(5) To suggest one investment for tax saving at the last moment, Equity Linked Savings Scheme (ELSS) can be the best option. It is also known commonly as ‘Tax saving mutual funds’. The reason to select ELSS for the last moment tax planning is: 

(a) It is easy to invest in ELSS of any good mutual fund house. If you are using online banking facility, then you can invest in ELSS sitting at your home or office.

(b) As you are doing it at the last moment, your investments may not be aligned to your goals or future plans. ELSS has the shortest lock-in period (three years) among all tax saving investment options. Therefore, you will get back your money soon and have the chance to reinvest them with proper planning. 

(c) ELSS is one type of mutual fund only, which invest in diversified portfolio of equity shares. Therefore, they are well-regulated.

(d) ELSS offer good returns, if held for long term. So even if you want to continue with your ELSS investment even after lock-in period of three years, you can expect good returns in the long term.


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