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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.