Last-minute tax planning
Last–minute tax planning
You are aware of the deadlines for submitting investment proof to the employer. You’re also aware that failing to submit proofs can result in greater TDS and lower take-home pay. Still, procrastination is a hard habit to break, and you may find yourself in the same scenario as last year. We agree that doing all the math and making tax-saving investments is not fun. Leaving tax preparation to the last minute, on the other hand, may lead to costly investment mistakes. Take heart if you’re one of the people reading this who hasn’t yet prepared their taxes. YOU ARE NOT ON YOUR OWN.
In this blog, we’ll share with you four basic yet effective methods to help you finish your tax planning quickly while also avoiding costly blunders.
Tip #1: You should check your liability for the year
The first step is to figure out how much income tax you owe for the year. Only if you owe a net tax will you be faced with the issue of tax planning.
When computing your income tax due, you must take into account all of your earnings as well as all of the deductions available to you under the tax code. The following are some of the common deductions that people overlook:
- Tuition fees must be paid.
- Premiums for life and medical insurance
- Allowance for House Rent
- Donations to vetted organisations
Make sure you have adequate proof/documentation for the deductions you want to claim, such as a lease agreement, gift receipts, premium certificate, and so on. This will assist you in the event of a future tax assessment.
Tip #2: Compare NEW vs OLD taxation regime
You have an optional new tax framework in place, which is a substantial departure from last year’s Budget. This new regime calls for a lower tax rate and fewer deductions. You can make the necessary calculations and select the most favourable regime for you. Let’s say you’re a somewhat inexperienced investor with insufficient capital to make new investments. In that situation, the new tax system may be beneficial. Assume, however, that you are a seasoned investor who has been making tax-saving investments every year and has a current home loan. In that instance, you may find that the old government is more helpful to you than the new regime.
Remember, if you’re new to investing and taxation, you may delegate this analysis to our tax specialists here.
Tip #3: Fill in your insurance gaps first
Assume you need to make new investments in order to lower your tax liability. Here, you should make sure you have enough insurance protection in the form of the following policies:
- Term life insurance
- Mediclaim insurance for Self-insured, family-insured, and parent-insured
- Preventive health screening
For young investors, making insurance a top concern is critical. If a breadwinner dies unexpectedly or a medical emergency strikes the family, the wealth corpus will not be adequate to safeguard the family’s future. Insurance acts as a solid foundation upon which you can construct your money castle.
Tip #4: Analyze the investment holistically before choosing it.
It’s not only about saving money on taxes when it comes to tax-advantaged investments. It should also assist you in building long-term wealth and meeting your financial objectives comfortably. Consider the following variables before making a tax-saving investment:
- Determine your financial goals and when you will need funds– The longer you have before you reach your goal, the more risk you can accept.
- Decide how much risk you’re willing to take. Simply put, this is the percentage of your investment you’re willing to keep in equity in order to sleep soundly at night.
- To acquire a holistic view of the investment, consider the risk, lock-in time, liquidity, taxation, and other factors, as well as whether the investment is consistent with your financial goals. Don’t be swayed solely by profits.
If you don’t have enough time to perform all of the above, consider investing in ELSS and PPF. Keep in mind that ELSS is a long-term investment; therefore, don’t cash it out before 5 years. PPF, on the other hand, has a 15-year lock-in period.
Tax planning ahead of time can help you prevent a slew of costly financial blunders that can’t be reversed. Even if you’ve left it too late to arrange your taxes, there are still simple last-minute financial steps you may take. The procedures will assist you in reducing your risks and ensuring that your investments are in line with your financial goals. You can reach out to us; we have a team with extensive experience and excellent customer service that can assist you throughout the process. So do get in touch with us and we’ll be happy to help.