Invest IT refund in FDs or equity funds to secure future of your children

When income tax is paid in excess of your payable amount, you can claim the refund by filing returns. For the last financial year, those, who have filed their returns by July 31 this year, can find their refunds deposited in their bank accounts respectively.

Hyderabad: We feel glad when money is credited to our accounts. The same holds good when we get an income tax refund. But you will not get good results if this money is spent judiciously. We should better use this to meet a financial plan or goal. Sometimes, you get a refund for some of the already paid tax even if you do not properly claim exemptions. Such a fund will come in handy for you to meet small financial contingencies if properly used.

Under the prevailing socio-economic circumstances, everybody needs health and life insurance. So, you should use all of your IT refunds to pay premiums if you have not taken any insurance plans till now. At the same time, keep in mind, that you may not be getting refunds every year. Hence, the plan now itself to mobilise money that will be needed to pay premiums next year. If you have pending credit card bills or personal loans, clear them. The entire refund amount may be used to repay such dues. Even if you get a small amount of refund, first use it to repay your credit card debt. Thus, you can get relief from avoidable financial burdens.

You should consider IT refund not as an amount already spent by you, though it is a returnable sum returned to you as per the rules. It would be better if this refund is set aside as a contingency fund. Don't forget, you need to have a contingency fund, enough for three to six months, to meet possible unforeseen future expenses. If you don't find immediate use for your refund, then invest it in a long-term plan. Equity funds are the best for this. The Equity Linked Savings Scheme (ELSS) mutual funds will help in reducing the tax burden as well.

Our IT refund relating to the last financial year can also be spent to pay various civic taxes in the current year. A little portion of your salary currently goes towards TDS (tax deducted at source) and this gap in your salary can be filled by the refund you get for the last financial year. You can also use your refund to give a gift to your children by investing all of it in fixed deposits or equity funds. This money will prove greatly useful for laying a strong foundation for their future.