Strategize Your Tax Planning with These Expert Tips

You want to start planning saving for income tax but don’t know where to start from or what to do? No worries you only need some tips that can help you in the planning of your taxes.

Before planning your taxes, you must know about Tax Planning.

Tax planning is the analysis of your financial situation i.e.

  • Time of the income 
  • Time of purchase  
  • Other expenditures

It helps you plan and make better investments to save tax, in which you can invest your hard-earned money to have the least tax outflow.
For a better life after retirement, it is crucial to reduce your tax liability and maximize your ability to contribute to your retirement plans.
If tax planning is done right, then it can go a long way and can help you meet your financial goals.
Strategize Your Tax Planning with These Expert Tips
                                                                             (Image source: Shutterstock)
Here are some strategies that you can opt for better tax planning this year-

Delaying Your Tax Planning

The root of all mistakes regarding your tax planning starts with your delaying in the planning of your taxes. You only start planning your taxes in the last three months of the financial year, which leads to many mistakes and increases odds for penalties and other problems.
Thus, you should start planning early and not until the eleventh hour, which will lead to many more problems.

Don’t Just Invest to Save Tax

Is it that time of the year when you receive calls from insurance companies and their agents ask you to buy an insurance-cum-investment plan? These plans are linked with the market, such as ULIPs or endowment plans.

And you might have entertained these calls and gave them a cheque to buy one to save taxes. You did this only because of lack of awareness, and you were in a hurry to avoid taxes.

Don’t buy any endowment plan to save taxes because you might end up paying a high premium for a much lesser sum assured, and that premium might be paid a commission to a life insurance agent.
Don’t invest only to save taxes but invest so that you can get something out of it and meet your financial goals.

Buy health insurance

Not all investments are for profits or wealth creation; taking care of future health uncertainties is also important. Purchasing health insurance will not only cover your health-related issues but will also provide you a tax benefit.

  • Under section 80D of Income Tax Act 1961, you can claim tax benefit on the premium paid for health insurance.
  • For the premium paid for yourself, you can avail a deduction of Rs 25,000/-.
  • You can avail an additional deduction of Rs 25,000/- for your parents.
  • If a policy is for someone above the age of 60, then there is an additional income tax limit of Rs 50,000/-

Hence, health insurance should be an essential component of your tax plan.

Know Your Tax Saving Options 

One of the biggest mistakes that taxpayer do is that they don’t look beyond section 80C of Income Tax act 1961, as it suggests investing in investment instrument for tax saving, but this is not optimal for the overall reduction of your tax liability.
Taxpayer are unaware of other section of the Income Tax Act, like

  • Section 80D (Mediclaim)
  • Section 80G (Donation to Charitable Causes)

Taxpayer lacks knowledge regarding such expenses often end up paying a higher tax. So, open your options for income tax saving and save yourself from paying high taxes.

Assess Your Tax Liability

Tax liability is the amount of tax payable based on current and applicable tax laws.
By lessening your tax liability and earning significant savings by investing in better plans like term insurance plan and other plans which are not related to endowment plans, you can plan your taxes better.

Having a specific estimate of your tax payable helps plan your taxes that works towards income tax saving. The amount of tax liability computed would allow you to determine how much to invest to save tax.

Invest In Your Life, And Not Just To Save Taxes

In life, investments help you financially secure your goals and your families well being. Therefore, you need to make sure you choose the right investments that go beyond tax savings.

These strategies not only offer you tax benefits, but it also includes a lifetime of financial security to you and to your family to meet their goals.

Happy investing. Happy planning!