8 ways to use your income tax refund

Profile picture

By Anshul IST (Released)

mini

You received your tax refund this year and you still haven’t decided how to use it. Here are some tips for using your income tax refund to get you closer to your financial goals

Many taxpayers began receiving income tax refunds after filing their returns (ITRs) by the July 31, 2022 deadline. The excess tax credit paid is akin to a windfall gain, many treating it as a government boon. The net result is that most people end up spending their income tax refund credit on unimportant indulgences.

However, your financial expert will recommend that you plan them more meaningfully to get closer to your financial goals. It is part of your hard-earned money anyway and should be used wisely.

Here are some smarter ways to spend or invest your income tax refund money:

Take out life or health insurance

Carefully planning for uncertain events that can place a significant financial burden on your family should be people’s top goal, said Archit Gupta, founder and CEO of Clear, an online financial services platform.

“If you don’t have life and health insurance coverage for you and your family members, consider it one of the first necessities and buy a good insurance plan. It will also give you a tax advantage “, said Gupta. CNBC-TV18.com.

Pay off the debt

The trick is to prepay the full amount at the start of the loan term so that your total interest on the loan goes down, which, in turn, means you spend less time going into debt. However, if you have excess cash, you can prepay and get rid of the monkey even later in the loan term, Gupta said.

pay tax

Once you receive a tax refund, you need to calculate the tax payable for that quarter of the one-year period and see if there is still tax payable. For example, this is the current second quarter. You should see what the estimated tax liability would be for those two fiscal quarters and check to see if you have paid any taxes due. If there is a shortfall, you should use that refund receipt for that payment, said Sujit Bangar, founder of Taxbuddy.com

Donate to charity

If your finances are in good shape and you are feeling generous, you can also donate your tax refund to charity and deduct the charitable donation from your taxes.

Invest in long-term equity or equity-oriented mutual funds

If you have excess money, invest it in long-term equity or equity-oriented funds. However, you must remember that investing in stocks is a high-risk, high-reward game. You can also invest in equity-linked savings plans and benefit from tax advantages.

Invest in pension schemes like the National Pension Scheme (NPS)

Investing in pension schemes like the NPS can help you get a deduction of up to Rs 50,000 for the same deduction beyond Section 80C, Gupta said. CNBC-TV18.com.

Boost your emergency fund

An emergency fund, also known as a contingency fund, is an essential body that you should set aside to deal with emergencies that arise unexpectedly, such as job loss, a drop in salary, or a medical emergency. So if you have extra cash on hand, you can keep it as an emergency fund.

Sign up for a course to improve your professional skills

Various online skills courses allow you to challenge yourself and have new learning experiences. It can benefit your personal and professional life. Over time, a raise could be worth much more than the value of your refund today, Gupta said.

Note to readers

The opinions and investment advice expressed by the investment experts on CNBCTV18.com are their own and not those of the website or its management. CNBCTV18.com advises users to check with certified experts before making any investment decisions.

Leave a Reply

%d bloggers like this: