Nikhil (33) was informed by his Human Resources (HR) department to submit his investment proofs for the financial year by the weekend, failing which they would not accept any proofs after the deadline and the tax would be deducted accordingly.
Coincidentally, he received a telephone call from his friend who had just joined a life insurance company as an agent and he shared information on a so-called "wonder plan" which could save tax as well as give good returns.
Knowing that he had little choice and very little time to consult anyone, Nikhil succumbed to the offer and shelled out Rs 50000 for the insurance plan and managed to submit the receipts on time to claim the tax benefit.
Whether the insurance plan would serve Nikhil's real needs is anyone's guess, but investing just for tax benefits without understanding the product can make you regret later.
December-January is the period when salaried employees have to submit all tax related investment proofs.
If employees fail to do this, it is assumed that no tax-saving investment has been done.
The tax is then calculated and apportioned from January to March.
In spite of going through similar situations in the past, most fail to learn from their mistakes.
So if you are staring at a similar situation now, you can consider a few good options:
Text: Steven Fernandes, Business Standard
Images Courtesy: AFP and Associated Press