Many financial experts believe introducing the new tax regime (NTR) has destroyed the habit of saving. But does this make any sense? The NTR has no section 80C benefits like the old tax regime.
So they believe that those who were forced to buy tax-saving products and forced to “save tax” (that is lower than taxable income to the extent of the investment) would no longer do so as the NTR is more beneficial unless you have a huge home loan interest component and HRA. You can check which regime is better with our free tool: New Tax Regime vs Old Tax Regime Calculator: Check which is better.
I’m afraid I have to disagree with this. The first mistake that most money managers make is buying the product to “save tax”, which is almost always the wrong product for the wrong purpose with the wrong expectations. And if lowering the tax burden is the only reason one keeps investing in such products, then it is best avoided as it causes more harm than good.
But isn’t investing ‘somewhere’ better than not investing at all? No, it is not. Instead of forcing people to lock in their money in the name of tax saving and discipline, we need education and awareness about why we should invest for our future regardless of tax benefits.
Yes, many people will not listen when they are young. But then it will come around when they cross 30-35; at that time, their portfolios would be much less because they did not buy the wrong products.
The argument that forced investing in the name of tax saving is beneficial sounds like a form of moral policing to me. Why should self-aware, disciplined investors, along with most indisciplined investors, should also be forced to lock in their money to lower taxes?
We must have as much access as possible to our hard-earned money without buying products we don’t need. We do not like the government telling us how to run our lives. So, why crib when the government has made it easier for us to lower our tax burden?
Sure, many people may or may not “invest” as they did in the old tax regime (there is no meaningful way to quantify this), but that is their problem. If they want a better future, they should invest, and this choice should be organic and free of tax-saving benefits. Else, it will not be sticky. It is silly to assume that forcing someone to do something will result in “good habits”. It need not.
Awareness and education is the way forward. Not forced savings. Yes, behaviour is key, but so is freedom. We must be free to behave as we live, make mistakes and live and learn.
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