Budget alone must not decide your investments

It is often a practice to start deciding on our investments for tax deductions at the time when investment declarations have to be submitted or at the fag end of the financial year. Our investments generally follow a similar pattern of deductions available to us. So, if tax deduction limit for an investment increases, we try to increase our investments in that scheme.
For example, 80 CCF infra bonds have created quite a ripple in the market by giving extra tax benefits over and above the `1,00,000 deductions and there is a mad rush of people wanting to invest the additional amount. This is good, but the zeal of investing needs to continue even when there aren’t any tax deductions.
I have often heard people saying we have completed our investments for the year, which means I have availed of all my tax benefits which were due to me by investing in tax-saving instruments. The vital questions one has to ask is what is the purpose of these investments? Is it just tax saving? If not, then will it help in my retirement? Or meeting the cost of my child’s education? Or for buying the house I desired or for any other goal?
The finance minister prepares a Budget and grants deductions looking at the country as a whole and obviously, he will not have any clue as to what our personal goals are. Tax planning is just a part of financial planning process and does not cover the whole gamut.  Financial planning deals in understanding your milestones and goals, then understanding your current financial
position that is assets, liabilities and income, expenses and finally, making a blueprint of the list of things to be done to achieve the set milestones. In this entire exercise, tax planning helps us only to a certain extent.
So, while planning our investments, the following points need to be considered:
l Earmarking goals and investments:
The moment one invests in any asset, he needs to decide how and when this investment will yield him the desired result. This will not just help him be patient with his investments if he has long-term goals in mind, but also yield the desired result in future.
l Invest in an asset even if there are no tax benefits?
The question is am I entering into an investment only for tax saving purposes e.g. interest on housing loan on self-occupied property is exempt to the extent of `1,50,000. If I am in the highest tax slab, I get a benefit of approximately `45,000 in tax. Does it make sense to pay `1,50,000 in interest to get a benefit of `45,000?
l Plan and invest, do not invest and plan
Plan your investments at the start of the financial year. Investments done at the eleventh hour are generally done in haste and might not yield the benefit we seek. So, to summarise, Budgets and tax deductions are just a guide for us to make our investment decisions. If they start dictating terms regarding our investment decisions, meeting our goals financially could be a far-fetched dream.
The writer is partner,
MSVentures
Financial Planners