‘Tis The Season

Like every year, salaried investors, especially first-time tax payers, are going to wake up to a rude shock – the tax-saving season arrives right after the indulgence season. The effect this has on the middle-class Indian investor’s mind is catastrophic; we tend to avoid a single minute’s delay in rushing our eggs in one big tax-friendly basket, all at the same time. Even the most disciplined investors give into such panic; saving tax takes precedence over strategic investing.

Creating value

In the New Year and the years that follow, this does not need to be the case. As India’s tax-payers get fintech-savvy and drive adoption of capital market-linked tax products (ELSS, ULIP and NPS), it becomes critical for the ecosystem to help investors move beyond such lumpsum investments. Regular, disciplined investing in such tax-friendly instruments is the key to unlocking their optimal value for investors, and defining their long-term perception and AUM prospects for the industry. It can also be an effective way to avoid the extended hangover that is typical of last minute investment declarations and proof submissions.

Enabling a fundamental shift

This calls for a two-level shift. At a policy level, basing the upper limits for tax benefits should vary basis income tax slabs rather than a one-size-fits-all approach. This can give salaried investors more room for choice while investing in tax-saving instruments. More importantly, it can help set the tone for adequate pension security for a generation of Indians; by 2050, close to 20% of India’s population will be over the age of 60 and looking at retirement.

At an industry level, we need to unlock the next level when it comes to product proposition, especially among aware investors; pension goals must be core to investments such as NPS and therefore, to our platforms and campaigns.

Ringing in the NPS season

Meanwhile, we must begin where we are – encouraging lumpsum investment this tax season can initiate a greater number of tax-focused investors to understand the larger potential of a category as NPS. It can accelerate the sense of relatability in knowing:

• Regular investing helps manage market volatility effectively even for partially market-linked products
• Installment-based investing allows for leveraging flexibility/switch through the year
• When evaluated strategically, it can serve as a key performer in one’s retirement planning portfolio apart from offering immediate tax benefits

So let’s roll out that Season’s Greetings campaign already.

Views are personal: The author – Kurian Jose is the CEO of Tata Pension Management Private Limited.

Disclaimer The views expressed here in this article is for general information and reading purpose only and does not constitute any guidelines and recommendations on any course of action to be followed by the reader.
The views expressed are of the author and are personal. Tata Pension Management Private Limited (TPMPL) may or may not subscribe to the same. The views expressed in this article are in no way trying to predict the markets or to time them. The views expressed are for information purposes only and do not construe to be any investment, legal or taxation advice. Any action taken by you on the basis of the information contained herein is your responsibility alone and TPML will not be liable in any manner for the consequences of such action taken by you. There are no guaranteed or assured returns under any of the schemes managed by TPML. All investments in Pension Funds and Securities are subject to market risks. NAV of Funds may go up or down depending on factors affecting securities markets.