As the month of March approaches, you can observe professionals sweating over the tax season just around the corner. This is the time they rush around looking for tax-saving assets, collecting proofs for their returns, and the right forms to be submitted, so that they could save maximum capital. This is also a time that you can find people filing advance tax, just so they could save the hassle of last-minute filing.
Tax planning should begin much before the tax season. This gives you enough time to find the best options for tax saving and wealth creation. Consider the scenario that your annual income is around ₹5.5 lakhs. If you look upon any reliable income tax calculator, you’ll realise that you owe the Indian government more than ₹36,000. However, if you have invested in life insurance, you could get a tax exemption of up to ₹1.5 lakhs on your taxable income.
Want to know more about why tax planning is important? Take a look.
What is tax planning?
Tax planning is no rocket science. It basically means being responsible with your finances and keeping track of all your income and expenditure, right from the beginning of the financial year. This way, you can use an income tax calculator and make relevant investments and adjustments to reduce your tax burden. It is difficult to come up with a lump sum for investment at the final moment.
When you plan efficiently, you follow a few basic steps to accurately predict your annual income, taking into account even the passive sources. It also allows you to explore various avenues of tax-saving instruments, such as Public Provident Funds (PPFs) and health insurance. These can not only provide peace of mind for when you need emergency funds but could even bring you into a lower tax slab.
Who can do it?
Anyone with analytical skills and a keen interest in mathematics can perform tax planning. It doesn’t need years of study and is easy to follow up online, with multiple tools available for efficient planning. Chartered accountants do this for a living. Nevertheless, you can do it for yourself and help out a few family members too, keeping them aware of the savings that they might otherwise miss out on. You would be surprised to know how many people don’t realise the benefits of advance tax.
Why is tax planning important?
Tax planning enables you to create an updated record of your finances, something that most people either don’t bother with or leave it for someone else to do it. It enables you to stay up to date with market trends, government policies, and ways to save capital over the long-term. It makes the process of filing your taxes a cakewalk too. There are several types of ITR that you should know about to file under the right category. With proper tax planning, you can choose the one that benefits you the most.
With proper tax planning, you can not only help yourself but the entire society as a whole. With it, you come to know that you get a reimbursement when you donate money to worthy causes. When you have valid receipts, you can support an initiative close to your heart without any financial burden. Tax planning also helps you understand the expenses, such as charges for loans and education, which can help reduce your taxable income.
It might seem like a boring task at first, but with regular planning, you can garner huge savings, which can all go towards ensuring a secure financial future. Given the impact of the pandemic on the economy of the nation, a skill like this can be immensely crucial during such uncertain times.
So, go ahead and look at online resources for tax planning and find the best tax savings investments well in time for maximum tax deductions.