30-Jan-2019 written by : FSI-Team
Money Saved is Money Earned. We have been listening to this quote ever since we were a child, and there is nothing wrong about it. The money saved today or this month may sound a lesser amount, but cumulatively when checked, it will be a lot more than it appears today. Millennials today, however, and of different thought and believes in living today without looking at tomorrow and that’s how they see.
But, at times they fail to understand about the security savings may have along with the emergency that may fall someday on the head and without just the current month’s salary or earnings, that won't last long! Also, we have many people who would invest the money in various options with various perspectives. Along with the basic motive of investment of goals planned and secured future, there few investments that are done to save taxes. For a layman, it becomes difficult to understand why taxes and what are the options via which it can be saved etc. We will look at a few of the options that help one save taxes.
Building credit today has become important as at many places, the credit score is what shows the responsibility in money matters of an individual. A quick brushing of what credit score is. A score is a three-digit number ranging between 300-900 given by the credit bureaus which is obtained by five parameters viz. payment history, the amount owed, length of credit history, credit mix and new credit. A score below 600 is considered a low score, between 600-750 is average and 750+ is a good score. The credit bureaus in India that give score are TransUnion CIBIL, Experian, Equifax and CRIF HighMark. When talking about investments and score, one must know that there are very few options that help in achieving both of these goals together. Now, let’s check some investments options that helps one save tax and also helps in building credit or helps when one wants to Improve CIBIL score.
Applying for a loan and getting it approved is one big factor in saving taxes and building the credit, both the motives solved a once. Majorly, not everyone is blessed with amazing income or the heritage from forefathers that all they want to buy has the money required and hence loans are a good option. It also gives the sense of achievement that one has done something of their own! Under the section 80C and 80D of income tax, a loan is given major value in saving the tax. However, depending on what loan have been taken and for the amount that has been taken varies. Like for home loan, the amount is bigger, for education loan and Car Loan it differs. But, loans are one of the ways that help in achieving both these goals at the same time.
Not so much in saving taxes, but building credit is where this help. Work cautiously, do not use more than 35% to 40% of the total limit and pay the bills monthly before the due date and a good score will not go anywhere.
PPF is an option that helps in saving taxes and works as a good government based investment option. With the Jan 2018 terms, the interest received quarterly is 7.8% against the investments made and has tax benefit under section 80C of taxation. This helps a little in building the credit too.
Buying gold and investing money on that helps in saving the tax. However, not entire gold purchased will help in saving but some amount calculating the income will be declared and can be an option in saving the tax. Also, then applying for a goal loan keeping the same gold as security for a few months will help in building the credit too.
Some national saving plans, FDs, Real estate, Mutual Funds are the options that could help in saving the taxed but will change and help improve CIBIL score on a very minute level. But one should always remember, that no effort wasted and will always help on a longer run.