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With the end of Financial Year 2018-2019 approaching, you may be looking for ways to claim deductions, save on taxes, and boost your net gains. With the deadline just a few days away, now is the time to double your efforts if you haven't done so already. To manage your finances as efficiently as possible during this time, here are 5 investment moves that you should consider making.
1. Grab indexation benefits through 3-year FMPs
If the security of your debt funds is a major concern, opt for an FMP (Fixed Maturity Plan). Close-ended debt fund schemes, FMPs give you indicative returns and help mitigate risks arising due to interest rate fluctuations on debt funds. In addition, investing now will let you enjoy attractive savings as well.
Generally, returns from FMPs are counted as short-term gains and are taxed just like returns from any other debt scheme are. However, if you hold on to your FMP for at least 3 years, it will be counted as a long-term gain and you will be taxed at a lower rate, 20% post indexation. The interesting part is that investing right now will let you get higher, 4-year indexation benefits by just holding your FMP for 36-38 months. This is because investing now will allow your FMP to run across 4 financial years.
2. Make minimum contributions on NPS and PPF accounts
The National Pension Scheme and Public Provident Fund are two of the most common saving schemes as they help you save for retirement and claim tax benefits at the same time. PPF offers you double benefits of tax-free interest, and yearly deductions of up to Rs.1.5 lakh. On the other hand, NPS lets you claim a total tax benefit of around Rs.2 lakh via Sections 80CCD(1), 80CCD(2), and 80CCD(1B).
Since these are long-term investments, you may forget to make the yearly minimum contribution that is required to keep them active. In case of PPF, your account gets discontinued, and you can't make withdrawals or use it as collateral when you don't make the minimum contribution of Rs.500. Similarly, failure to make a contribution of Rs.1,000 to your Tier-1 NPS account can lead to it being frozen. So, ensure you don't miss investing!
3. Capitalise on the threshold of Rs. 1 lakh on stocks and equities
If
you
are
a
long-term
investor,
you
may
be
averse
to
the
idea
of
booking
profits
at
regular
intervals.
However,
this
move
may
actually
impact
your
long-term
strategy
positively.
Currently,
if
your
long-term
capital
gains
exceed
Rs.
1
lakh
in
a
financial
year,
they
will
be
taxed.
So,
the
idea
here
is
that
you
book
profits
now,
in
order
to
capitalise
on
the
threshold
of
Rs.1
lakh
that
is
available
to
you
till
the
end
of
the
financial
year.
While
brokerage
costs
may
be
involved,
it
is
a
smart
move
that
can
see
you
improving
your
net
long-term
gains.
In
the
new
financial
year,
you
can
simply
buy
back
the
stocks
and
equities.
4. File overdue income tax returns
If you haven't filed taxes for the financial year 2017-2018, then make sure you do so right away to avoid running into greater trouble in the future. As per Section 234F, you can do so latest by 31 March 2019 while paying Rs. 10,000 as a penalty. However, this fee will not be more than Rs. 1,000 in case your total income was Rs. 5 lakh or less in financial year 2017-2018.
5. Benefit from high FD interest rates
Now is the right time to invest in Fixed Deposit, as the market is rife with volatilities, which has been fuelled by economic uncertainties. Additionally, the repo rates were recently reduced by 25 basis points, which means lenders may consider lowering FD interest rates to make higher profits.
According to a recent report, while other instruments struggled to cope with the market and give investors desirable returns, FDs continued to make its investors smile through 2018. In fact, FDs outperformed both equities and debt funds last year. The numbers reveal that equities gave returns of around 2.7%, debt funds offered 5.5%-5.9% and FDs yielded 6.25%.
Fixed Deposit interest rates are currently at an all-time high, with Bajaj Finance Fixed Deposit offering an interest rate up to 9.10%, and you stand to benefit from 0.25% more interest rate upon renewal. This means you can capitalise on the high interest rates and gain maximum returns, by investing in Fixed Deposit, before the interest rates come down. Start investing in Fixed Deposit now, to grow your savings and reap the benefits of high interest rates easily.