Investors choose to invest in various schemes according to their preferences based on their financial goals. Their risk tolerance and return expectations also affect the ultimate decision to invest. Those who like risk bearing securities may like to invest in shares and other similar securities. Mutual funds are another option to invest your money. Debt funds and Govt. securities are reliable investment options. They offer steady returns with almost no risk. There are a few reasons why one should invest early in their life. Similarly, it is important to invest in the month of April itself of any financial year. The benefits which we get from various schemes get maximised if we do so.
Start of the year for any individual should be a motivating time to initiate good things. An established or experienced investor should get better at their investing skills while the new entrants in the market can learn by investing step by step. The time when you begin makes a lot of difference. As per the famous proverb “ Well begun is half done”. Usually many of us start planning for investments only in January or February to save tax. Saving tax or earning handsome returns, whatever is the goal, one should start planning at the beginning of the financial year. Despite knowing the significance of investing early, many skip the dates and end up investing only later during the year. This might end up in hurried investments to meet the March 31st deadline. Estimate your tax liability in advance and start acting accordingly. There are reasons behind doing so such as-
- You can better implement your objective if you start planning early during the year.
- The returns can be maximised as the money is already allocated into different schemes. It starts fetching returns and by the time the financial year ends an investor can accumulate more money.
- If at all needed you can make adjustments in your portfolio and even get tips from a financial advisor to attain your goals.
There are popular schemes like Public Provident Fund, Sukanya Samriddhi Yojana etc. which the public at large find attractive for the purpose of investing. Interest earned, maturity process and contributions made all enjoy tax exemption. There is a special significance of April 1st to 4th if you want to invest in PPF. The reasons for the same are discussed here.
Let’s take an example. An individual has PPF investment at the end of March 31st 2022 as Rs. 8 lakh and he/she makes a fresh contribution towards it amounting to Rs. 1.5 lakh say on 2nd April. PPF balance shall now be Rs. 9.5 lakh. For the purpose of calculation of interest, the minimum balance between 5th April and 30th April shall be Rs. 9.5 lakh. The interest shall be Rs. 5620 payable on this amount @ 7.1%.
If you miss this period and make a contribution on April 9, then the minimum balance shall be the same i.e Rs. 9.5 lakh but the amount of interest earned on it shall decrease and it will be Rs. 4733 as it shall be calculated on Rs. 8 lakh and not Rs. 9.5 lakh. The interest is always calculated from the 5th of any month.
PPF interest is calculated on a monthly basis but is credited once every financial year. The interest is not compounded. Make sure you make the contribution at the start of the year to take your minimum balance up and fetch maximum returns. However, it is not at all necessary to contribute the entire sum at the start if you do not have funds to invest at one go. Interest income will vary according to the time of investment made.
Sukanya Samriddhi Yojana
Date of investment could play as a decisive factor in case of other investments as well. Sukanya Samriddhi Account is a savings scheme for the girl child aged upto 10 years for a tenure of upto 21 years. A minimum investment of Rs. 250 is to be made and maximum investment upto Rs. 1.50 lakh can be made. The scheme has EEE tax features. SSY account offers an interest rate of 7.60%. It was last revised on 03 Jan 2022.
The interest for the SSY account is calculated on the lowest balance for the calendar month. It is payable from the fight day of the month till the end of the month. The interest is credited once at the end of each financial year just like PPF. The interest accrued on an SSY account is compounded on a yearly basis. It is advisable to deposit money in an SSY account either once per financial year or in smaller regular instalments. You can make deposits as per your choice irrespective of the interval between the instalments. The interest is calculated on the lowest balance in the account between the close of the fifth day and the end of the month. Otherwise, there is no limit on the number of deposits that one should make in a month or during a financial year. It is advisable to make deposits within the first 4 days of a month. Apparently if you start investing at the start of the year, the interest income will be more. Note that the Government revises the rate quarterly and the rates are getting lower. You can invest maximum upto Rs. 1,50,000 per year to get tax exemption.
National Pension Scheme
Those who are willing to invest in NPS also should not wait till March 31 to make their contributions because of the time taken for the money to get actually credited to the account of the NPS fund manager. Make sure that you contribute by the 25th of the month during which the deadline ends. Online contribution must be done by 27th or 28th. Investors make last minute investments in order to earn the tax exemption benefits. But it should be remembered that by doing so they lose on the return part. The same amount of money, if invested during the first month of the year will not only give them the tax exemption but also interest income. The amount of funds at an individual’s disposal always becomes the deciding factor for the time of investment.
Other tax saving instruments include insurance plans-general and medical both, equity oriented Mutual Funds etc.
There is a famous saying” Sell in May and go away”. Why so? The summery period of six months starting from the beginning of the year to October affects the stocks more positively than in later part of the year starting from winter. This strategy proves to be helpful in the equity markets as well. They could invest in May and again in November but not later.
Bhoi Smrutirekha Dharanidhar