Are You a Certain Kind of Tax Planner?

The Tax Planning Season comes with its own share of blockbusters. Here is a sneak peek at the different type of tax planners that hit the stage during this season of tax saving. While there is nothing inherently good or bad about any of these characteristics, they showcase a few learning that can be adopted and highlight some mistakes that can be avoided. All this, to make you a better Tax Planner and a more aware investor.  

Lights, Camera...

Oh! He’s pretty common and you must have definitely seen him around searching for last minute avenues to plug in his investments and save some Tax. Practically squeezing in at the last minute, he will push his associate to send him forms within a really crammed time frame, and will then chase his accountant to incorporate his declarations. He simply can’t make it early to the Tax list! As a result of his hurry, he often makes impulsive decisions that cost him (a lot) over the long term. (Thankfully, in a recent survey that we conducted with our Quantum Equity Direct Readers, a miniscule 1% fell under the last minute tax planning category. We’re glad that a majority of our readers take their Taxes a lot more seriously.)

If this is You:

You’re a person on the go. And while that may not necessarily be a bad thing, it may make sense to spend some time with regards to your tax planning as well. Ironically, taking a correct decision takes considerable time, but making a wrong choice is just a fraction of a minute. The repercussions though last longer than the time taken to reach that decision. Well planned taxes are a reflection of a strong and robust financial plan which works just as hard as you.

His entire investment portfolio is like one big joint family. He makes note of every single tax instrument that his colleague / friend even mentions, and ensures that he has that one too on his list. Every bond, ELSS, and even donations to charity that are indulged in by his associates, are a part of his tax saving regimen. Does he overdo it? Sure he does. What is overdoing, we’ll leave that for another day.

If this is You:

You’re surely a favorite with your circle of associates. Always eager to please and to be “one of the gang”, you subject your tax planning decisions too to choices that are usually recommended by people you know. While, some of these may work well for you, it pays to know that your portfolio may not necessarily be the same as that of your colleagues / friends. For instance, you may probably need a higher mediclaim than your single and younger colleague. It’s nice to have a sense that everyone is in it together, but tax planning is a more personal and specific activity and would be designed to suit your needs as an individual.

His view on taxation depends on his mood. He may wake up today feeling that ELSS is the way to go, while tomorrow he may have second thoughts about allocating his resources to a tax saving mutual fund. This fluctuation in thought process clouds his long term vision. On days when his thinking is biased towards a particular option, he could well provide his accountant with a big enough push towards achieving his quarter target.

If this is You:

You may be known as “the Weatherman” because of frequent mood fluctuations. However, this is no reason to treat your money shabbily. Instead of riding your investments based on your mood or current frame of mind, you should look at bringing in discipline, especially by using Systematic Investment Plans (SIPs). Tax Saving Funds too could help you overcome a change of mind since they come with a 3 year lock-in period. 

The most intelligent of the lot. Here is someone who works diligently, and saves equally well. He understands that every rupee saved, is a rupee earned. Tax planning to him is very much a part of his investment strategy. With a long term outlook, this Tax Payer enjoys today and ensures that his tomorrow is equally taken care of.

If this is You:

You’re perfect! If only there were more of you, investments and taxes wouldn’t be as misunderstood as they currently are. While you have got most of it right, we sure hope that you spend some time to review the choices that you have made. A regular review would only work towards optimizing your investments and helping you enhance your savings.

And...Action...

Rational thinking makes an intelligent tax saver. Tax saving is not complex, if you have a clear thought process. There are many alternatives and options available for tax saving, but you have to choose the right instrument. You have to simplify the available options and choose the ones that match your requirement.