Tax refund on its way to you? Take some time out to read this article and convince yourself to use it wisely.

8 Smart ways to put your tax refund to good use

It’s another regular day when you open your inbox – and what do you know, you see a message from the IT department informing you that a tax refund is due to you. Oh thank you, thank you! The timing couldn’t have been more perfect. There’s this amazing dress that you saw yesterday that you absolutely must have! And there’s that long-overdue trip.

But wait. Before you head out to party as though you’ve just a won a lottery, remember, it is not new money that you’ve got; it’s your own hard-earned cash that the government is deigning to return to you. Don’t blow it all. Why don’t you put the money to good use instead, and make it work a little?

Yes, it’s okay to spend on shopping and travel, and otherwise pamper yourself, but it’s equally (if not more) important to consider saving for the future and to also pay off any debts you may have. Your tax refund can give you that much-needed boost in reaching your goal of savings or even in considerably bringing down your debt.

So here are some ideas on how you can use your tax refund wisely, and also have some fun along the way!

1) Build your emergency kitty

An emergency never comes with a warning. You never know when you might need a large sum of money. Start building your savings and always have 4-6 months’ worth of essential living expenses set aside in an emergency fund. Come what may, do not touch that account unless it really is an emergency.

2) Start investing for your future

Invest the money in mutual funds or some financial vehicle that can give you good returns 5-10 years down the line. Make sure you look for something with a lock-in period so that you are not tempted to dip into it. At the end of the lock in period, reinvest the money, either in the same vehicle or look for the current best option.

3) Clear or reduce your debt

Do you have ongoing loans? If there’s no pre-payment penalty, use your refund to put down a lump sum towards your outstanding loan amount. This will help you pay your debt faster, and the quicker you finish with your loan, the faster you will be able to start using the money on other things that matter – like saving, investing, or pursuing your passions.

4) Upgrade your job skills

Talking of passions, do you ever feel as if you would like to learn some new skills or go back to college? Will it help to better your career or job prospects, or earn you a better salary? Then absolutely go for it. However, now that you are old enough, you shouldn’t be asking your parents to support your education anymore. Use your IT return to invest in yourself.

5) Treat yourself

Finally some fun advice, you say. Being grown-up and responsible can sometimes get too much (even though it is important, really important). The idea behind this article is not to stop you from enjoying life, but to help you find the right balance. If you’ve always been doing the right thing, maybe it’s time to reward yourself. 

So pick up that new outfit that you have been eyeing for a while. Pamper yourself at a spa or salon. Whatever you do, have fun. Spoiling yourself is sometimes a good idea, especially if you are not in the habit of doing it regularly.

6) Split the refund amount

While we do advocate that you spend money on yourself, do so only after you have saved or invested part of the amount. Decide beforehand what the spending-saving ratio is going to be – 50:50, 40:60, or 30:70 – and stick to it when the refund amount comes in.

7) Donate to your favourite charity

Contributing to your favourite charity might not always be possible on a tight monthly budget. However well-intentioned, your decision to donate can move to next month and then to the next, and so on till eternity. This is where your tax refund can help you. You can use this unexpected windfall to give a little to a charitable organisation. Besides the feel-good factor of having made a difference, donating to registered charitable organisations allows you to claim tax deductions too.

8) Invest it in your business

Are you an entrepreneur itching to take your business to the next level? Or perhaps you have a great idea to start a business and you need seed money. You can put the income tax refund to good use in either case. Turn your income tax refund into income and also get small business tax deductions in the next financial year as well.


Whether the refund amount due to you is a massive windfall or whether it is just a drop in the bucket, you should look at your refund money smartly, and consider ways to make your financial situation better. So what’s it going to be?