- Tax saving should not be a last minute exercise begin it from the start of financial year
- Various investment instruments help reduce your taxable income and save on your taxes
- Link the benefits from these tax saving investments to your life goals
We have always professed the need to start saving on taxes right from the beginning of the financial year. In doing so, you can plan your tax outgo as well as savings a lot more efficiently. Take advantage of tax-saving deductions to minimize your tax outgo as much as you can, but at the same time do not commit some of these mistakes.
Not maximising Section 80C limit: An individual or HUF can save taxes up to Rs 1.5 lakh under Section 80C of the Income Tax Act. However, there are instances, when taxpayers do not maximise this limit in a financial year. Plan your tax-saving investments in such a way that you’re able to take the benefit of the deductions made available. Likewise, spread this limit through the year to make the most of your savings potential. If you are salaried, check with your HR or accounts manager on the quantum of PF deduction. Once you know this sum, you know, what is left for you to act.
Map tax savings to financial goals: Do not view tax savings in isolation. To maximise your tax savings, optimise the available options to fit in with your financial goals. For instance, do not view life insurance solely as a tax saving instrument — it has far greater value to your life, when viewed as insurance. You should also factor PF contributions under your retirement goals than treat it as an unimportant expense.
“In your enthusiasm to save taxes, do not commit mistakes that will come to haunt you later”
Last minute rush: Do not wait for the last few months of the tax season to save taxes. Tax-saving investments made at the last moment won’t allow you to benefit from them entirely. Start saving and investing in tax-saving avenues at the beginning of a financial year, by planning your investments in different tax saving options like PF, insurance, fixed deposits, PPF and pensions. The more time and thought you give to your tax-saving investments, the more you will be able to benefit from them.
Ignoring basic exemption: Don’t let ignorance get the better of you. Know the deductions that you can claim like children’s tuition fees, medical insurance, LTA etc. Learn about all the expenses that are eligible for tax deductions under various sections of the Income Tax Act.
These are broad mistakes that one commits when it comes to tax-saving that are repeated too often. Have the upper hand when planning with taxes this year, than lose out on ways to save money.
