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Tax Saving Mistakes to Avoid in 2022

Do you think March is a special month? Because you shouldn’t! As the financial year nears its end, people across India make the same mistakes again and again. As the Founder of Cube Wealth, I find bad tax-savings measures more annoying than Tom finds Jerry. I usually focus on ways to create wealth but, today I’ll talk about tax saving mistakes to avoid like the plague!

Satyen Kothari
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Do you think March is a special month? Because you shouldn’t! As the financial year nears its end, people across India make the same mistakes again and again. As the Founder of Cube Wealth, I find bad tax-savings measures more annoying than Tom finds Jerry. I usually focus on ways to create wealth but, today I’ll talk about tax saving mistakes to avoid like the plague!

Know What Your Taxable Income Is

If you are a salaried professional this is something you can do easily. You must look at your gross income and understand what your taxable income is. This is the income you are left with after all deductions. Look at what income you have to pay tax on after you’ve taken into account everything from your EPF, PPF, and Home Loan EMI to your rent and tuition fees, etc.

Never Invest Before Analysing

Not analysing all your options before investing for tax saving is like filling yourself up with starters at a buffet before seeing what the mains are; only this mistake will cost you much more than an unhappy palate. Speak to a wealth coach, get a financial advisor’s opinion, and invest only once you truly understand all your tax saving options thoroughly.

You can use our free mutual funds analysis tool to evaluate your current investment portfolio and make adjustments accordingly.

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Think of Overall Asset Allocation

Saving tax is not the ultimate goal – it is at best a means to the end. The end being smart wealth creation. You need to think of how you are allocating your money to different assets. You may have gold, SIPs, Stocks, Bonds among other assets – these should align with your overall financial goal and timelines. Instead of adding funds to items that just save taxes, invest the same amount smartly, and enjoy the long term compounding benefits.

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Don’t Break The Piggy Bank

A lot of people fall prey to using their emergency funds for mindless investments focused on tax saving. This is a big no-no! Your emergency fund should never be touched and if you don’t have one yet, you shouldn’t even be thinking about investing to save tax. Set up a fund that is set aside only for major emergencies and keep your tax-saving paws away from it. This kind of emergency fund setup is one of the first things we recommend to users on the Cube Wealth app as well.

Think Beyond Insurance

Investing only in insurance is an easy trap to fall into when you’re thinking about Section 80C. Sadly, that’s a terrible mistake to make. While you do need a good life insurance plan, investing in multiple insurance policies or investing in one just to get closer to your 1.5 lakh exemption limit is not wise. Insurance is for protection – that’s it! Not for saving taxes or investing. Don’t put all your money in insurance – your older self will hate you for it.

Don’t Fall for ULIPS

A unit-linked insurance plan will probably do you more harm than good. Especially if you’re buying it just for the sake of saving tax. The thing is that the death cover offered by most ULIPs don’t give you a good cover despite fat premiums. If you’re thinking of buying insurance buy one based on your needs, not the one the insurance agent is selling you for commission.

Watch What You’re Getting Into

Big returns and high-pressure bank advisors can blind you. Always read the fine print. You may not want to get that big return when you realize it offers poor liquidity. You should know what lock-in periods you are looking at and invest only if you’re prepared to block your investment for that period.

Those are my top mistakes to avoid for anyone who is looking to save tax as the financial year comes to an end. More importantly, it is crucial to understand that the ultimate goal of your investments isn’t to pay lesser tax but to create long-term wealth for you and your family.

Here is an episode of The Cube Wealth show which helps you with ways to make your money.


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Satyen Kothari

Founder & CEO of Cube Wealth, Satyen is a Stanford Alum in computer science, HCI, and tech entrepreneurship. He spent 15 years in Silicon Valley learning his craft with Apple and Frog Design. He then embarked upon his own startup journey in the US & India. He is also the founder of Citrus Pay – India’s first digital payment gateway. A successful venture that sold for USD$130M in 2016. Now, Satyen is simplifying wealth creation for busy professionals with Cube Wealth.

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