Financial freedom: Save on taxes and invest in these 7 asset classes next fiscal

“To achieve anything in life, one has to take a step.” The Fiscal Budget 2023-24 has brought opportunity for every individual to achieve financial freedom with our government’s vision towards “Amrit Kaal”.

Our Honorable Finance Minister Mrs. Nirmala Sitharaman has Unveiled the Union Budget for 2023-24. Where, she proposed several opportunities to the individual households which lays down seven priority areas- "Saptarishi'' i.e., Inclusive Development: Sabka Sath Sabka Vikas, Reaching the Last Mile, Infrastructure & Investment, Unleashing the Potential, Green Growth, Youth Power, and finally and very importantly boost to the Financial Sector.

Major highlights are the tax relief and new tax regime.

1. There will be no tax on income of up to ₹7 Lakh a year as per section 87A as against ₹5 Lakh under the new tax regime.
2. The new income tax regime becomes the default tax regime. However, the individuals will have an option to continue with the old income tax regime.

Let’s look at the new tax slabs of the Union Budget and what all is amended in terms of taxation and what is the final old regime vs new regime tax policy.

Thus, providing individuals an opportunity to plan their taxes by saving more towards their Retirement. (You can read one of our previous articles: Are you Planning to Retire in 2023 or Coming Years?).

One thing everyone can make sure of is that with India’s vision to Amrtikaal, we can also pave our way to a “Financial Freedom ka Amrtikaal” where we can plan to achieve our dreams, have a better lifestyle and fill all other missing gaps in our Personal Budget. Let’s see further how we can do this and make right use of our savings from the budget 2023-2024.

As we get more savings with the new tax regime and more investment avenues, we can rebalance our asset allocation strategy by following a new “Saptrishi” allocation model. 

The seven great sages mentioned in Hindu scripture, noted as “Saptrishi” and named as: Vashista, Vishwamitra, Bharadavaja, Gautama, Kashyapa, Jamadagni, & Atri. These “Saptrishi” have a significance in their own way and together they have immense knowledge and power. 

Similarly, our seven great asset classes act as “Saptrishi” for our Investment portfolio and protect us from downside. An illustration of the “Saptrishi” is shown below:

The Saptrishi Asset Allocation strategy is an assumptive strategy based on the moderate risk appetite investor who wants to diversify their portfolio in varied asset classes. This strategy can help individual to get through this “Amritkaal” to achieve financial freedom in life. Every asset class or Rishi’s has its own Risk & Rewards which can’t be ignored thus, expert advice is suggestible before investing.

Equity: One can invest in equities through various sub-investments like:

• Mutual Funds (SIP)
• Direct Stocks/Stock Basket/Smallcases
• ETF (Exchange Traded Funds)

Subjective of the risk appetite, One can create their own portfolio through fusion of these options. One can also make a portfolio of well grounded Blue-chip stocks, depending upon their investment horizon.

Sovereign Green Bonds: The Reserve Bank of India (RBI) recently auctioned its maiden sovereign green bonds worth ₹8,000 crore. You can avail benefits like:

• Diversification
• Tax-Free Investment avenue
• Financial Returns
• Transparency

Gold: Sovereign Gold Bonds are one of the best options to invest in gold as it carries various benefits like:

• Storage risk eliminated
• Zero Capital Gain Tax on 8 Years Maturity
• Only gold investment to provide 2.5% interest per annum
• Tradable bonds for better liquidity on exchanges

Other options can be Digital Gold, Gold ETFs & Gold Bees, Physical Gold and Gold funds

Silver: Considering bullions, silver cannot be missed too. They don't trade in bonds but some options to Invest in Silver is:

• Physical Coins
• Silver Future contracts
• Silver ETFs
• Silver mining listed companies

National Pension Scheme (NPS): An Ideal choice to plan for retirement while saving taxes & additional benefit u/s 80CCD(1) of Income Tax Act,1961. NPS is very smart and reliable option as:

• Helps in early retirement
• Low-Risk attached
• Tax Efficiency
• Regular pension after retirement

Debt: The default asset class for any allocation, we can't allocate every penny of our corpus for the only purpose of returns. Considering safety, one can park uninvested money in debt options like:

• Corporate Bonds
• Fixed Deposits
• Debt Mutual funds
• PPF
• Treasury Bills and more

Once needed, one can opt out from these options to invest in other asset classes according to market conditions.

Other Asset Classes: This is our 7th Rishi and this class consists of all other avenues where one can diversify further. This can be subjective from person to person and risk appetite. This consists of Investment options like:

• Real Estate (Real Estate Investment Trust)
• AIF
• PMS etc.
• Hedge Funds
• Commodities
• Collectibles

These are unique options one can opt for diversification which consequently leads to wealth creation journey.

Note: These asset allocation strategy requires regular rebalancing & timely reviews to minimize the market volatility while paving our way to capital appreciation in the asset classes.

Sanchit Taksali, is a Certified Financial Planner with more than 7 Years of Financial Industry Experience. Currently, he is handling the Wealth Management Department at the Sebi-registered investment advisory company Kedia Capital Services. He can be found on Twitter at @sanchittaksali and on Instagram at SanchitTaksali.