Stop streaming that show. Plan your taxes first!
For a lot of us, tax planning is always to be “done later”. Not anymore! Start now, follow these tips and rid yourself of tax-related panic attacks.
So, you have just binge-watched two seasons of your favorite show, and are wondering which one to devour next.
Because, what else can beat that feeling of tucking into your bed and finishing a series in 24 hours?
But, wait, aren’t you forgetting something—something to do with your money?
It’s your taxes!
Chances are that you are groaning by now; perhaps even reeling under a panic attack. Isn’t that what most of us go through when we hear that word?
Fret not! Like most things, tax planning is perfectly manageable if you plan ahead for it.
Keep an eye on April
If you think that you can plan your taxes at the eleventh hour, and still manage to save a lot of money, you are mistaken. You will inevitably take a slew of bad decisions, and end up tearing your hair out. Therefore, start planning from April, which is the beginning of the financial year. But why is this so? It’s because most tax-saving products have a lock-in period. The earlier you invest, the earlier your lock-in period is completed.
Start early to get higher returns
There’s another benefit of starting early—the benefit of higher returns. For example, consider that you invest Rs. 1.5 lakh in Public Provident Fund (PPF) every year for 15 years. If you do it at the beginning of the year, your total returns would be Rs. 42.48 lakh. However, if you do it at the end of the year, the amount would stand at Rs. 39.48 lakh. That’s a difference of a whopping Rs. 3 lakh! Reason enough to not procrastinate anymore?
Take stock of your investments
Once you have calculated your taxable income, your next step is to find ways to reduce it. Section 80C of the Income Tax Act comes with a range of options to help salaried individuals lower their tax liabilities for as high as Rs. 1,50,000. Investments in PPF, life insurance, National Savings Certificate (NSC), and Unit-Linked Insurance Products (ULIPs) can help you get a deduction under this section. Contributions towards pension plans and the New Pension Scheme (NPS) also qualify for tax benefits under different sub-sections of Section 80C.
Pursue tax-saving avenues other than Section 80C
Have you availed of an education loan? You can claim tax exemptions on the interest you pay towards it under Section 80E. Do you have a health insurance/mediclaim policy? Use the premiums that you pay towards it to lower your tax liability under Section 80D. Did you recently opt for a home loan? Then you are eligible for tax benefits under Section 80EE.
Don’t have a house, but stay on rent? You can use your rent receipts to claim tax benefits under Section 80GG. Did you recently write a book (other than textbooks for schools and colleges), and receive payment in royalty? Then you can claim that amount as deduction under Section 80QQB. So you see, there is never a shortage of avenues when it comes to saving your hard-earned money.
Get a tax advisor if you aren’t too sure
Are you one of those who have finished reading up till this point, but still find tax planning a tad too complicated? Why, you can always opt for a tax advisor! He will not only help you to minimize your taxes in the current year, but also reduce them in the future. Most importantly, since taxes cover a lot of areas in personal finance, he’ll have plenty of recommendations for you about your overall financial health. If you have just started earning and are looking for a sound tax-saving plan, it’s all the more reason for you to visit an advisor.
Last, but not the least, file your taxes well before the last date. This will ensure that you don’t make any errors. What’s more, filing your taxes on time will spare you a hefty fine levied by the IT Department. You also get faster refunds when you file your taxes early.