Smart investing strategies to save tax & increase your income

Every year with the start of New Year tax payers flock to investment advisors offices and try to save tax by investing in variety of schemes and maximize their net income.
Employed individuals after their Diwali bonus invest lumpsum amount in tax saving vehicles and lock their money for 3-6 years.

However it would be good if they try to adapt some smart strategies while investing for tax saving purposes which in turn helps to increase their net income.

Don’t invest lump sum:
The above strategy is the first maxim in financial planning. Apart from Post office & Bank Deposits all other investment vehicles like Mutual funds, ULIPS are based on market conditions. Investors by investing monthly some amount can tide over the market ups & downs.

Purchase NSC’s:
National Savings Certificates of Post Offices have lost their sheen as they are now offering interest rate of 7-8% which is minuscule when compared to returns of Mutual funds & ULIPS.
However if the investors purchase NSC’s they can devise a prudent plan that can avoid the money to be locked for 3-5 years. The plan goes like this:
“Purchase NSCs from any post office for any amount let say Rs 50,000 and take Overdraft facility from any other Bank. On Overdraft facility banks provide you drawing limit and you can withdraw up to the drawing limit. Draw the money and invest in mutual funds/ Insurance schemes regularly”.

The benefits of the strategy are:
1. You will invest the money for tax purposes
2. You will not lock your money for 3-5 years
3. If you pay Rs 5000 per month within 10 months your overdraft will be over and again
you use that money for the next year tax saving purposes.

In this way two birds are killed with one shot.

Please let us know your feedback on the above strategy.