Factors to consider

Factors to consider

One of the trickiest decisions in the tax-savings process is the one on “where do I invest”? With a plethora of options to choose from, it is important to understand the various facets of these options and see how they stack up against each other. Remember, you get the “tax benefit” only once, but you are tied up to the product for a long-term. So, you need to choose accordingly.

Given below are some of the important aspects on which you should judge your investment options.

    * Tax treatment: While all tax-savings options give you tax benefit at the time of investment, find out about the taxation treatment at the time of maturity. What many people don’t know is that there are instruments in which the maturity amount is not tax-free and is treated as taxable income. So, read the fine print and find out whether you stand to gain both at the time of the investment as well at the time of maturity.

    * Inflation protection: While fixed returns are desirable from the safety aspect, when seen in the light of inflation, they tend to lose their sheen. In contrast, market-linked investments offer the potential of higher returns, but typically do not come with any guarantee. So, depending on your age, income and risk-appetite, decide where you want to invest.

    * Flexibility: Your financial needs keep on changing with time. Hence it is critical that your chosen tax saving option offers you the flexibility of customizing the product to suit your changing needs & requirements.

    * Liquidity: One of the important criteria by which any investment option is to be judged is the liquidity options available. Ideally your investment plan should allow for money to be withdrawn in the event of sudden eventualities arising. Even after such withdrawals your investment should not close but continue as before.