The budget for 2024-25 was announced by the Union Finance Minister in July 2024. Investing and managing finances is a journey I embarked on in 2012, the year I began my career in an NBFC. Fresh out of college and stepping into the professional world, I quickly realized the importance of financial discipline and strategic planning. One area that significantly contributed to my financial growth was understanding income tax and leveraging that knowledge to my advantage.
The Beginning of My Investment Journey in 2012
One of the first pieces of advice I received was to start investing early, even with a small amount. That’s when I discovered the Systematic Investment Plan in mutual funds. SIP allows you to invest a fixed amount regularly to buy units of a mutual fund. I started with just 600 INR. While it seemed modest, it was a crucial first step. This habit of regular investing not only helped me save but also contributed to my financial growth over time. Moreover, it provided tax-saving benefits.
Leveraging Income Tax Benefits
In India, investing in specific mutual funds like Equity Linked Savings Schemes (ELSS) offers tax benefits under Section 80C of the Income Tax Act. Each year, as my salary increased, I adjusted my SIP amount upwards. This gradual increase allowed me to invest more without impacting my daily expenses. Additionally, I invested 20% of my annual bonus into mutual funds and index funds. This strategy helped expand my investment portfolio and maximize my extra income.
Growing My Investments
As the years went by, the returns on my investments began to grow. By staying committed to my SIPs and reinvesting a portion of my bonus each year, my portfolio started to compound. The power of compounding is remarkable—essentially earning returns on your returns, which accelerates wealth accumulation over time. Today, at 37, living in Gurugram, I look back with satisfaction at my investment journey. The disciplined and strategic approach I adopted has paid off, helping me earn my first 25 lakh rupees and more.
Lessons Learned
Start Early and Start Small
The most important step is to begin. Start learning about investments and put away even a small amount. Early investing with proper advice gives your money more time to grow in India.
Leverage Tax Benefits
Understanding income tax provisions can help maximize your returns. Investing in tax-saving instruments like ELSS not only grows your wealth but also reduces your tax liability.
Incremental Investments
As your income increases, so should your investments. Raising your SIP amount with each salary hike ensures your portfolio grows in line with your financial progress.
Reinvest Windfalls
Bonuses and other unexpected windfalls should be reinvested. This boosts your investment corpus and benefits from compounding.
Seek Professional Advice
While educating yourself about investments is essential, a financial advisor can provide personalized advice and help you make informed decisions.
Continuous Learning
The financial landscape is always evolving. Stay updated and keep learning about new investment opportunities and strategies.
Plan Your Life and Finances
Having a clear financial plan and adhering to it helps achieve your long-term goals. It’s crucial to set both short-term and long-term financial goals and align your investments accordingly.
In conclusion, my journey to earning my first 25 lakh rupees was greatly influenced by my understanding of income tax and strategic investments. It wasn’t just about saving money but making informed decisions and planning for the future.