Tax is a fee charged by the government on a product, service, or income. It is an obligatory payment made by citizens to the government. For this reason, you can aim to reduce your tax liability and protect their hard-earned money.
Tax planning is an exercise performed to meet your tax obligations in a systematic manner keeping in mind your current financial status.
You can lower your total tax outflow by accounting for all payables, permissible exemptions, deductions, and reliefs available to you under the Tax Act. Hence, tax saving activity is part of the whole tax planning exercise, whereby you as a tax payer can reduce your total tax liability.
But many a times, tax payers in order to save tax make investments without being aware about the financial product. And end up investing in inefficient tax saving instruments.
Therefore, tax planning exercise is as crucial as you plan for your other financial goals. By adapting to this method of “tax planning”, you not only ensure long-term wealth creation, but also protect your capital. It will enable you to save more through tax planning and fulfill many of your dreams in life.
STEPS FOR TAX PLANNING
Take benefits from the segments of individual salary
The tangible profits that one is allowed, can be demanded up to some amount as a deduction or is exempt in a few cases. The cases can be:
- Leave Travel Allowance
- House rent allowance
- Education allowance
Investment in Deductible Option
Deductions under this section can be immediately demanded in the tax return. Even not significantly claimed through the employer.
Filing ITR heads to the right result in tax planning. In order to leave last-minute troubles, file returns well in advance.
Tips assist in saving tax on income
One can hold all the medical receipts of their medical expenses for saving tax at year end. An amount up to Rs 15000 is non-taxable on medical expenses for them and their dependent family members.
House rent allowance
Can claim House Rent Allowance to save tax on one’s house rent. Though, this is relevant only when they are staying in rented accommodation.
Equity mutual funds
Investment in equity mutual funds is a vast approach to make profits 100% non-taxable.
It is a great way to save tax on income. Section 80G of the Income Tax Act allows a person to claim deductions up to a particularized limit. For donations made to charitable organizations or NGOs. This choice will save taxes as well as bring some way.
Buying of health policies
Premium paid on health insurance policies is recognized as a deduction from total income. In reference to the Section 80D of the Income Tax Act. Deduction up to Rs 15,000 is possible for insurance of self, spouse and dependent children.