I often get emails that read,
I want to invest in so-and-so financial instrument so that I can avoid paying income tax. Do you think this [financial instrument] is a good option? Alternatively, can you suggest other financial instruments that will further help me avoid paying income tax?
In my opinion, paying income tax and investing in a financial instrument ought to be independent and mutually exclusive actions. You should invest in a financial instrument only if it helps you achieve your financial goals — and no, “I want to avoid paying income tax” is not a financial goal.
Pay income tax. Define your financial goals. Invest in the right financial instruments; if a financial instrument does qualify for income tax deductions/exemptions, you just got the best of both worlds!
What do you think?
Tip Tuesdays is my initiative to share practical personal finance tips â€” every Tuesday. I’d be delighted if you could share a tip or two from your own experiences. Drop a comment to submit your tip. And, as always, do spread the word if you find this useful.