Get Smart About Your Tax Planning
Posted by Reena More on June 28th, 2019
Are you absolutely sure of how much tax you are liable to pay for the year? If you already have clarity - then you don’t need to worry about anything. However, if tax planning is jargon for you, or you’ve been investing to save taxes all this while, then this article may be of interest to you. We recommend you continue reading!
So, as the end of the year nears, there’s generally a mad scramble to get one’s finances and investments to avoid paying high taxes. What’s interesting to note, is that more than 49% of the total investments made in the ELSS category, happen in the last few months (March being the highest) of the financial year. (Source: Association of Mutual Funds in India)
But rarely do we follow this, don’t we? Most of our investments are done a few months before the tax filing period, with a clear objective to save taxes. In the rush of things, so many of us end up investing in such products, which goes without saying, helps save taxes - but why limit to just that when you can do so much more?
We strongly believe that tax planning doesn’t have to be a last minute trick to save some money; but in fact, it can be a planned opportunity to earn amazing returns while saving taxes. It should be done keeping your overall financial plans and goals in mind - to help you achieve your short, medium and long-term financial goals while saving taxes.
Want to know how you can go about doing that for yourself? The steps given below will ensure that you are on the right track of smart tax planning:
How can you take advantage of Smart Tax Planning?
Take advantages from the components of your salary
If you’re a salaried person, before you rush to make investments to save the taxes, we’d recommend that you browse through your salary structure. This is because, there are many components in your salary structure that would offer you the opportunity to leverage the exemptions under Section 80C. (Maximum deductible amount under Section 80C is ₹ 1.5 lacs) Here are a few possibilities:
By taking care of just these, you’ll be able to reach the ₹. 1.5 lacs limit. However, in case if you are not able to save enough, there are plenty of other options that can help you save more taxes.
Make Investments in Deductible Options
➔ If you’re an employee then Section 80C is the best option for you to reduce your taxes and maximize the salary that you will take home. Under Section 80C, you can claim deductions up to ₹. 1,50,000 from your total income.
◆ Some of the best components that can help you save your taxes under Section 80C include -- ELSS, Tax Saving Mutual Funds, Tax Saving Fixed deposits, Public Provident Fund, Employee provident Fund, National Pension System, National Savings Certificate, and ULIP – Unit linked Insurance Plans.
◆ PPF (Public Provident Fund) Investments are generally the most favored one, as your investments are exempted from tax during investment, accumulation, and withdrawal. However, if you are risk-averse, then Tax Saving Fixed Deposits or ELSS can be ideal.
➔ Not only can you claim the principal amount that you are repaying towards the home loan, but you can also claim for tax benefits under section 24 for the interest that you are paying on the principle amount of the home loan of up to ₹. 2,00,000 in a financial year.
➔ Aside these, Section 80D and 80DDB can help you claim for tax deductions for the premiums you paid for the Medical Insurance of up to ₹. 25,000, and ₹. 40,000 for Medical Expenditure of self, spouse and dependent children.
File your Income Tax Returns Timely
Timely Income Tax Returns filing is the direct outcome of accurate tax planning. It is needless to say that the earlier you file ITR it is better, in several ways. There are only two ways to file your Income Tax Returns:
➔ e-Filing through the Income Tax Website
➔ Traditional Filing at the local office of the Income Tax Department
Here are few points to note for tax planning:
➔ Note down the objectives of your investment, its gestation period, maturity, terms and conditions, the goals (short, mid, long term) that you want to achieve by investing.
➔ Make sure you invest in the products that help you achieve the goals that you have set.
➔ Before you decide on the investment opportunities, it is important to analyze different options and take a wise decision.
➔ Since this activity requires time to mature and show results, it is suggested that you don’t take hasty decisions of investing in tax saving schemes that don’t give you benefits in future
If you’re wise - you’ll make sure that you enhance your portfolio and reach your goals, while giving it a room to breathe and grown.
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About the AuthorReena More
Joined: April 9th, 2018
Articles Posted: 13
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