Align tax savings with financial goals, risk appetite, liquidity needs

With barely two and a half months left before the financial year ends, the window for effective tax planning is closing fast.

- SANJEEV SINHA

For investors who have opted for the old tax regime, this period often triggers a rush to complete tax-saving investments. But experts warn that purely deduction-driven, last-minute decisions can have lasting financial consequences.

Key considerations

The first step is to determine whether the old tax regime is truly beneficial for you. "Often, taxpayers lock themselves into unsuitable products just to cut taxes. Sensible tax planning should strengthen financial discipline and long-term financial stability, not undermine it," says Vishwas Panjiar, founder, SVAS Business Advisors.

Avoid locking up too much money in tax-savers with low liquidity. "While tax saving matters, it should never come at the cost of strained cash flows," says Santosh Joseph, founder and chief executive officer, Germinate Investor Services.

Provident Funds

Employees' Provident Fund (EPF) and Voluntary Provident Fund (VPF) work on similar lines. "Under EPF, both employee and employer contribute. VPF is a voluntary top-up made only by the employee without any matching contribution from the employer. It allows employees to channel a higher share of their salary into disciplined, long-term savings at source. The withdrawal, lock-in, and taxation rules are the same for both," says Joseph.