Are You a Certain Kind of Tax Planner?

Posted On Thursday, Feb 09, 2012

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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...


The Rush Hour Tax Planning The "Rush Hour" Tax Planner

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.


The Hum Saath Saath Hain Tax Planning The “Hum Saath Saath Hain” Tax Planner

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.


zindagi na milegi dobara Tax Planning The “Zindagi Na Milegi Dobara” Tax Planner

High on life and charged on expenses, this investor binges on life, in excess. Whether it is daily expenses, or lifestyle requirements, he always overshoots his budget. So it isn’t too much of a guess to realise that his Tax planning is in a complete doldrums, that’s whenever he gets the time to consider planning his taxes. While March 31 doesn’t leave him looking too happy, he puts it all behind him and takes up his spending frenzy with renewed vigor, with the false notion that post the deductions, he now has another 365 days before the next Tax season.


If this is You:


You enjoy your life to the maximum. However, remember the wisdom passed down by our elders: Income – Savings should equal Expenses. As clichéd and theoretical it may sound, there is the experience of a lifetime that reflects itself in this simple formula. Remember that your peak earning period is just around 25 years, during which you would need to create a surplus for yourself for days when the income won’t come in. The only way you would be able to do so is by bringing in a little discipline into your expenses, and by beginning to save more than you spend. And you could start right away by planning your taxes well.


gone with the wind Tax Planning The “Gone with the Wind” Tax Planner

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. 


Tax planning The “As Good As It Gets” Tax Planner

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.


(An open ended Equity Linked Saving scheme with 3 Years lock in Period)


Risk Factors: Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Please visit – www.quantumamc.com/disclaimer to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the scheme's objective will be achieved and the NAV of the scheme(s) may go up or down depending upon the factors and forces affecting securities markets. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme(s). Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.

Above article is authored by Quantum.

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