Is March the worst month to invest in tax saving instruments?

At a very basic and fundamental level, we can grow our wealth by either saving more money or making more money. One of the most popular ways of saving money for salaried professionals in India is by investing in tax saving instruments. But what if we could not only save more but also, make more money without taking any additional risk.

I don’t know about you, but when I started working, I just thought about the saving part. Can you guess in which month I bought these tax saving instruments? You guessed right, in March when everybody around me was doing the same. Luckily for me, I changed that habit many years back when I discovered the magical term compounding which essentially grows your money exponentially, but for compounding to work its magic you need one critical factor and that factor is TIME.

Let’s imagine a situation which is pretty common. It is 10th of March and you realize that there are just 3 weeks left for the fiscal year to end. You have not utilized any of the tax saving instruments so you decide to max out on your Section 80C limit of Rs 1.5 Lakhs by putting your savings for the year in PPF. Come 1st of April and you are relieved that you will now save a decent amount of money via tax savings. But hold on, how much interest have you earned on the deposit? The answer is ZERO, why you ask, well, for PPFs you have to deposit the money before 5th of every month to earn the interest for the month.

So, what do you do now? Well, going forward you can invest in tax saving instruments in the beginning of the fiscal year more specifically, before 5th of April, especially, if it is PPF. This way, you will earn interest for 12 months vs 0 months from the example above. If you choose to max out Sec 80 C by investing Rs 1.5 lakh, you would earn a pretty decent amount in interest which will only compound over the years.

By doing the above, i.e. changing the timing of the investment have you taken any additional risk? Did you have to put in extra effort? Answer to both the questions is NO so, why are more people not doing it? Why are they leaving extra money on the table? We can try to answer those questions but more importantly, What will you do in the coming fiscal year with your tax saving corpus?






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