Advice or warning - any of these received before time is a delight to the customer. More so because it reduces his work of keeping track by a great deal. One of the many signs of a successful financial adviser is the ability to proact.
As the financial year end nears, investors start fretting about their tax planning, or the lack of it. An adviser's role here is to think before his client thinks, and be his tax saving guide - starting from determining tax slab, evaluating investments, tracking the performance of their investments etc. Here's how:
Not only investors but advisers too should abide by this rule. While your client may fall short on planning, you cannot. Basis your client's investment profile a host of tax saving opportunities may be available. However, if not recognized on time, those investments would be futile. As an adviser, you need to remind your client of his regular tax saving needs,chart out a clear roadmap and actively track the performance of the investments.
Identify the tax bracket
Qualifying for tax deductions depends on which tax slab an investor falls under. Basis the investors' tax bracket, you as an adviser can handpick investments best suited for effective tax saving within the prescribed limits and lay out a customized recommendation as to which financial instruments the investor could invest in.
Picking the ideal tax saving investment
While tax saving if offered by several investment avenues, your client may not know which avenue to invest in. Section 80C offers a host of tax saving instruments - PPF, NSC, Infrastructure bonds, ELSS etc, but it is your function as an adviser to figure which option is suitable for your client, given his income, eligibility and requirement of funds.
Customization is the key
One size doesn't fit all. As an adviser, you may have several clients but each client obviously demands and deserves unique attention. If a client seeks tax saving along with capital growth over a period of time, an equity linked saving scheme could be ideal as it invests in equity which has a relatively higher growth potential and an investment up to Rs. 1.5 lakh in ELSS is deductible under Section 80C of the Income Tax Act, 1961.
You should change when the client changes
If you got it right the first time, follow up is the key. Any change in your clients' details - change of address, change of bank details, change in tax slab etc should be factored in with immediate effect to keep his plans on track.
Saving tax is one common objectives of almost all investments made. Your customer's need of tax saving can be covered with a host of options besides the ones available under Section 80C of the Income Tax Act. Beyond 80C, there are, as you are aware, other tax savings avenues too including RGESS, health insurance, NPS etc. While there are several options available, giving your client the appropriate investment advice is what matters.
Mutual Fund ELSS provides the investor with dual benefits which is the growth of equities along with the need of the hour - tax saving under Section 80C of the Income Tax Act. Not only this, in comparison to other tax saving instruments such as Provident Fund, Public Provident Fund, National Savings Certificate etc, mutual fund ELSS have a lesser lock-in period and aim to provide relatively higher returns owing to the equity exposure.
Your client may be looking for more than a single objective to achieve but through investment options like ELSS, you could help him achieve more than one objective, in one investment.
Disclaimer - The article is for general information only and does not have regard to specific investment objectives, financial situation and the particular needs of any specific person who may receive this information. Investments in mutual funds and secondary markets inherently involve risks and recipient should consult their legal, tax and financial advisors before investing. Recipient of this article/ information should understand that statements made herein regarding future prospects may not be realized. He/ She should also understand that any reference to the securities/ sectors in the document is only for illustration purpose and are NOT stock recommendations from the author or L&T Investment Management Limited, the asset management company of L&T Mutual Fund or any of its associates.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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