The suspense of tax-saving investments

All of us love a good mystery, don't we? Nothing like a whodunit to keep us on the edge of our seats; keep our reading glasses on the edge of our nose if it's a book. We love the suspense, the built-up towards the climax, each twist and turn keeping us guessing, trying to predict the next unravelling of the plot, and grinning gleefully when something happens the way we expected it to - a good mystery might not be good for our hearts, but who cares! Keep us on our toes and we're with you hook, line and sinker.

This is also the reason why we're passionate about sports. 6 runs required from 6 balls or the same number of goals by both teams with just a few minutes to go, we lap it up like it's the last game that's ever going to be played. We're such suckers for mysteries and suspense that we also follow professional wrestling, which we know is rigged. But hey, we don't know in whose favour it's been rigged, right? We're so eager to know what happened to that Malaysian Airlines jet that we'll even read about previous cases of planes having vanished into thin air. We can't get enough.

But you know where our love for suspense goes too far? When it comes to our annual tax-saving investments, that's where. We know that the best time to get started with our tax-saving investments is at the beginning of a new financial year. We know this, and yet, when do we actually think about it seriously? At 11:47 pm on 29th March. Don't blame it on your tendency to procrastinate, blame it on your love for mysteries. Planning your tax-saving investments on time would kill the suspense, after all. Will I be able to invest enough to save taxes, has my accountant pulled his hair out as yet - stuff like this excites us.

But this year, try doing things a little differently. If you're the kind of investor who can stomach the ups and downs of equity, there's no better way to save taxes than by putting your money in Equity Linked Savings Schemes (ELSS). These are equity mutual funds that come with a lock-in period of 3 years and earn you a tax break under Section 80C of the Income Tax Act. And the right time to start putting money in ELSS funds is right after you finish reading this column. Start a monthly SIP for the entire financial year and reap the rewards of tax deduction and long-term tax-free gains.

For those who prefer to err on the side of caution, there is a plethora of fixed income investments to choose from that earn you tax breaks as well. There are bank deposits, pension schemes, provident fund contributions, et al. These investments will give you guaranteed returns, but will have a longer lock-in period.

Whichever way you decide to go, it's important that you start the journey ASAP. Keep the mystery and suspense to books, movies and sports. It's no mystery that a rupee saved is a rupee earned, right? And where would you like that rupee to go - in the coffers of the government or the comfort of your wallet? Not a hard choice to make, is it?

This story first appeared in April 2014.