As the time for filing tax declarations arrives, we would like to highlight two investment related mistakes that may be preventing you from making every rupee count.
Investing in ULIP’s for tax saving
ULIP’s are a combination of an insurance policy and a mutual fund at a much higher cost. It is much more cost effective to invest in a tax saving mutual fund and separately buying a life insurance policy. The mutual fund in addition to saving tax helps grow your money and the life insurance policy provides security cover for your family.
Insurance cover that is too high or too low
Sameer who is 23 years has bought an endowment policy with cover of Rs. 3 lacs from his first salary cause his friendly advisor suggested it. Sameer’s parents are not dependent on him.
Rupeebot answers: Sameer is on the right path by thinking about savings. He should however have invested the money in a tax saving or other equity oriented mutual fund. At his life stage and situation, pure life insurance does not seem to be an immediate priority though premiums would be low.
Ravi, is 35 years old and is the single earning member of his family which includes his wife and two kids. His take home salary is Rs. 75,000 a month. He has an insurance cover of Rs. 3 lacs.
Rupeebot answers: In Ravi’s case, the insurance cover is too low. It should be at least Rs. 9 lacs after consideration of other things such as his available savings and assets.
Rupee Tax – making every rupee count