After coming back from his vacation, Sidhesh Tulange, a 33 year old Software consultant, logged into his office computer to make the first statement, “Oh No !! I forgot to submit this before going to vacation.” The HR department has reminded him for submission of his tax saving proofs and declarations by 31st Dec. “I should not delay this further. Let me close this by today itself”.
Some minutes later, he received a call from a telemarketer. Sidhesh was usually reluctant towards attending marketing calls, but today he spoke to them nicely.
The telemarketer said, “Sir, are you done with your tax saving investments for this year?”
“Not yet”, said Sidhesh.
“That’s great. Our company has launched a very good product specially for people like you (As if the caller had all the history of Sidhesh). This will give you insurance, investments and tax savings too.” Said the telemarketer.
“Sounds Good. What documents would you need from me ? (The desperation of Sidhesh is worth noting. He is not even asking any details of the plan, as he is too worried about the proof submission).
“Few basic documents like your ……(blah-blah-blah) and a cheque of Rs. 50,000.” (The telemarketer didn’t bother to ask how much Sidhesh is willing to invest for the purpose of tax saving).
“No problem. I have all of them with me. Can you send someone to pick-up the same today itself?” Said Sidhesh.
“With pleasure Sir.” The telemarketer was jumping with joy. She could imagine her bonus package getting swollen with deal closed.
Sidhesh handed over the cheque of Rs. 50,000 and signed the documents without having any idea of what he is doing. He got the receipt, submitted it to the HR and thought that the “pain” has gone for once.
Actually, the pain started after that. When he later added his PF deductions, they were adding up to Rs. 48,000. Also, he was paying an EMI of Rs. 30,000 towards his home loan, thereby paying Rs. 3,60,000 p.a. This had a principle component of Rs. 75,000 in it. Thus, his total investment amount for 80C was already Rs. 1,23,000. However, since Rs. 1 Lakh is permissible for deduction u/s 80C, there was no need for him to buy the unknown product from the telemarketer. Thus, he failed to save tax from this investment.
Sidhesh was trying to console himself by thinking that at least he has a life cover now. But then he came to know that he could have got a life risk cover of Rs. 75 lakhs at a premium of Rs. 5,000-6,000 p.a. Whereas he was paying a premium of Rs. 50,000 for a cover of just Rs. 5 Lakhs. Thus, he failed to buy a good life cover from this investment.
His last argument to himself was this amount would save him some money for his retirement. Wherein he came to know that this investment in next 25 years would not accumulate more than Rs. 25 Lakhs for his retirement whereas he could have invested it wisely to accumulate Rs. 80-90 Lakhs for his retirement.
Sidhesh realised that this mistake has happened just because of his lethargic attitude throughout the year and then deciding in haste when it came to tax saving proof submission.
He learnt that:
1. Mis-selling happens because of lack of due diligence from the investors.
2. We are bound to make mistakes when we leave things for the last minute. Thus, plan in advance and execute in time.
3. If you are paying a home loan, get a break-up of principle and interest from the bank, so that you know how much benefit can be claimed u/s 80C and u/s 24(b).
4. Calculate your PF deduction (Employee contribution) and accordingly work out your requirement to save for 80C.
5. Prefer one time investments like ELSS over recurring investments like endowment plans, ULIPs or money-back plans.
6. Buy a term plan for a life cover. Even if you do not need it for saving tax, you need it to secure your dependents in case of an unfortunate event.
7. Seek professional guidance than rely on fly-by-night agents or telecallers.
Mis-sellers are on prowl and You could be the next Sidhesh !! Beware !!
We look forward to your feedback and comments on the above article. Please feel free to contact us on saurabh@nidhiinvestments.com if you have any questions.
(The views mentioned in the article are personal opinion of the author)
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Prof. Saurabh Bajaj is an Author, Mentor, Motivational Speaker and Wealth Planner.
He has done his MBA from Narsee Monjee Institute of Management Studies (NMIMS) Mumbai, one of the top 10 management institutes in India. He holds the prestigious FRM (Financial Risk Manager) degree awarded by Global Association of Risk Professionals (GARP), USA. Till date, there are less than 15,000 professionals in the world, who have been honored with this degree. He has also been awarded CFGP (Chartered Financial Goal Planner) Certification by AAFM (American Academy of Financial Management).
After his MBA, he joined J P Morgan, the second largest Investment Bank in the world. He has worked with J P Morgan as Risk Analyst for more than two years.
Prof. Bajaj also holds an Advisory certification awarded by AMFI (Association of Mutual Funds of India). During his stint at Bombay Stock Exchange, he has handled Investment Management and Treasury operations of the BSE Corpus. He has set up an entrepreneurship venture in the field of Wealth Planning and Investment Consulting under the name “Nidhi Investments” and holds the profile of CEO.
Prof. Bajaj sits on the Expert Panel of CAClubindia.com and MBAClubindia.com as Investment Expert.
He is actively involved in investor education through his blog www.professorbajaj.com which has a readership from 78 Countries all over the world. His articles are also regularly published in caclubindia.com , mbaclubindia.com , totalca.com , charteredclub.com, bankbazaar.com and lawyersclubindia.com .
He has been awarded the title of “Best Article Writer” from caclubIndia.com in Jan 2012 and has been selected amongst “Top 5 Technical Writers” from all over India in Feb 2013.
He has been invited by various TV Channels like SPIN TV, CNBC TV18, UTV Bloomberg Etc for programs like "Expert Advice" , "What Markets Want ", "Budget Analysis" etc.
He has been invited by Several organisations like Lions Club, Rotary Club, Agrawal Welfare Foundation, Rajasthan Mandal, Agroha Vikas Trust, Union MF, UTI MF, Arthamitra Gurukulam, Vidyalankar Institute of Technology etc for expert lecture on "Smart Investing", "Life is A Celebration", "Financial Freedom", "The Digital IFA" etc.
He was ranked 8th Merit at All India level NMAT which got him selected for MBA programme at NMIMS, Mumbai. He did his MBA with Capital Markets as his specialisation.
Soft Skills has become an inevitable part of every selection process and teaching learning process these days. The students from small towns and tier II cities, in spite of being talented and well equipped with technical skills, are seen struggling in the selection process. This is because of their lack of exposure to these soft skills. Mr. Bajaj has a zeal for training candidates to develop these skills and has been imparting the same on since last two years. This zeal and passion inspired him to set up his own firm called “Knowledge Circle” which aims to train candidates for soft skills.
Till date, he has trained more than 5000 participants from over 220 organizations across various fields of soft skills.
He has been associated with MSBTE (Maharashtra State Board of Technical Education) to conduct Soft skills training workshop for the faculties of Polytechnic Colleges in Entire Maharashtra (Mumbai Region, Pune Region, Aurangabad Region and Nagpur Region) since last 8 years.
He has also been associated with ICAI (Institute of Chartered Accountants of India) for training CA Students on various topics related to Communications skills, Group Discussions etc.
He was invited by Fr. Agnel Polytechnic College, Vashi for a motivational workshop for faculties. He was also invited by Vivekanad Polytechnic College for "Communication Skills and Email Etiquette" training for non-teaching staff.
Apart from these, he has conducted “Capacity Building Soft Skills workshop for Faculties” at ITI Gunj, ITI Pusad, ITI Digras and ITI Umarkhed. This was the first ever soft skills workshop for faculties in the history of ITI’s in Vidarbha. He was also invited by Shivaji Education Society to conduct similar Soft skills workshops for the faculties and office staff of Shivaji Junior College Pusad, Shivaji High School Pusad, Shivaji Vidyalaya Belora and Shivaji Vidyalaya Bhojla.
He has conducted training workshop on “Effective Presentation Skills” for the relationship managers of HDFC Mutual Fund, Andheri Branch, Mumbai.
He has also been invited at College of Management and Computer Science, Yavatmal, College of Dairy Technology, Warud, B N College of Engineering, Pusad, B D College of Engineering, Wardha, College of Engineering and Technology, Akola, Dr.N.P.Hirani Institute of Polytechnic, Pusad etc. for the Guest lecture on “Developing Interview Skills”.
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It’s very useful information most of us who are from non-finance background faced this problem once in life.Thanks saurabh to share this.
Thanks for the compliments Rahul !!
Yes, you are right !! Most of the people face this problem once in life. But there are some who face this every year !!
Thus, we have attempted to alert them.
Thanks again for your visit and feedback. Looking forward to more in future.
Very good article……
Thanks Sir !!
Looking forward to more visits and feedback in future !!
Very timely nice article. Making people beware when ‘season’ is starting.
Great job.
Thanks Sir ji !!
Yes, thought that people make good use of their vacations by reading this article and can alert themselves before the season starts !!
Thanks again for your visit and feedback !! Looking forward to more in future !!