Are you expecting a significant sum as a tax refund from the IT department? Once you complete Income Tax Returns (ITR) verification, the tax department can take 15-90 days to process your refund. Rather than using tax refunds for fancy gadgets or a vacation, you can use them to strengthen your personal finances.
Here are 8 smart ways to use tax returns-
After receiving the tax refund, you can deposit the funds in a high-interest Savings Account to grow your savings. For instance,AU Small Finance Bank offers different types of Savings Accounts with interest rate, Monthly Interest Payouts, and various other benefits.
Debt clearance is another wise way to use the tax refund. You can use the refund money to clear outstanding Credit Card dues or repay other debts to reduce your financial burden.
You can invest in our Regular Fixed Deposit Account and earn at higher rates with monthly or quarterly interest payouts to ensure regular income flow at the time of retirement.
A financially secure future is one of the best gifts you can give your child. You can look for a popular child investment plan, or if you have a girl child, you can also consider investing in the government backed Sukanya Samriddhi Yojana (SSY).
There are also various tax-saving schemes, like the 5-Year Tax Saving Fixed Deposit, Unit Linked Insurance Plan (ULIP), and Equity Linked Savings Scheme (ELSS), that are eligible for tax deductions under Section 80C of the IT Act. The tax refund can be invested in these income tax saving schemes to reduce your tax liabilities.
There are many different types of mutual funds, like equity, debt, hybrid, etc., where you can invest the tax refund. Invest in mutual funds of your choice to get closer to your financial objectives.
Life is uncertain, and emergencies often come unannounced. Thus, it is essential to have an emergency fund with adequate savings to manage your basic monthly expenses for at least 6-12 months. You can use the refund money to boost the emergency reserves.
When choosing between splurging or investing/saving the tax refund, it is wise to pick the latter. While it is completely fine to occasionally splurge on yourself and your family, do so sensibly without losing sight of your financial objectives.
If you're looking for a banking partner that can support you throughout your financial journey, AU Bank offers some of the best banking solutions, including high-interest rate Savings Accounts, Fixed Deposits, Recurring Deposits & other financial options.