Tax planning and months of February and March

Sanjana and Sanjay were out on a stroll early wintry Thursday morning of February in Mumbai, which generally is a rarity for this city.

“What a pleasant weather today is!” Sanjana noticed and asked, “Let’s go outdoors during the weekend and enjoy the nature. What say, Sanjay?

“It’s a good idea and weather is also perfect for a day’s outing. But I have some important personal work to do and shall not be able to join you.” Sanjay replied.

“Oh! You and your so called important personal work!” Sanjana exclaimed, “You always have your excuses ready for everything!”

“No Sanjana”, Sanjay replied in a bit serious mood, “it’s already February and I need to do my tax related investments and planning for the year.  I need to submit the documents to my employer in next few days.

“I don't get any time to do this during weekdays and need to complete it during the coming weekend.  We shall plan for outing some other day, Sanjana.”

“You are not yet through with your tax related investments, Sanjay?” Sanjana quizzed, “I never expected you to be lazy in such matters.”

Irked by Sanjana’s question, Sanjay responded “Now where laziness comes in this? Last quarter of the year is meant for tax related investments and planning and I am bang on time.  Only issue is it is not possible for me to do it during weekdays and hence I am doing it during my off time.”

“That’s the problem with all you guys.” visibly upset Sanjana said, “You start your tax planning activities in the month of February or worst in March.  You wait till the end of the year and then start lamenting about it!”

Clueless Sanjay questioned, “Can you please elaborate on this?”

“I don’t want to ruin your pleasant Thursday morning.” Sanjana replied, “But still it is important for you and all others who start their tax related activities late to understand.

“Tax planning should not get started during the end of the year, but should be carried out right at the outset of the year.  By this what I mean is it should be carried out in the months of April or May.”

Still not convinced, Sanjay ask her to explain this further.

“Listen, whatever activities you are planning to do right now - like investments in PPF or tax savings mutual funds, insurance premium, etc - can take place anytime.

“Infact I do all these things in the month of April itself so I need not worry about my tax investments in the month of February or March.   Now all I need to do is take a print out and submit the proof to my employer.  That’s all!”

“That’s all?” Sanjay said, “How is this possible?  If there is a way to do all this earlier during the year, I am all ears.  Tell me how I can do that.”

“It’s simple.” Sanjana started explaining, “All you need to do is plan and start early.  Let’s say you are planning to invest Rs. 1 lac in PPF during the year.  All you need to do is give your bank standing instructions to transfer Rs. 10,000 p.m. from your savings account to your PPF account.  Similarly for mutual fund investment, you can start a SIP and invest during the year in ELSS scheme.  You can structure all your investments in a similar fashion.”

“This is interesting and very much practical.  I never thought about it in this way.” said Sanjay.

“As regards home loan and interest deductions, EMI on home loan is paid monthly so you need not do anything about it.  Same applies in case you pay rent periodically to your landlord.  You can also plan purchasing your insurance policies such that the premium is due early during the year so that is also taken care of.  Have I missed out anything?” asked Sanjana.

“You have covered almost everything.  For things like medical bills, etc. these gets accumulated during the year as and when the expense incurs.  All I need to do is keep record of these things and bingo I am free for you during the weekend for outing!” exclaimed Sanjay.

“Yes” said pleased Sanjana, “This is not only the most effective way, but also helps you to plan your investments quite early during the year.  This time I absolve you from the outing but next year I don’t want you to blubber about the same thing again!” winked Sanjana.

How are you planning your tax investments?  Do share your experiences and thoughts with other readers in the comment section.