The months of January and February of a financial year is the time one remembers his taxes and with the due date fast approaching running behind taxes becomes a top priority and all other matters take a back seat. But is it a good idea keeping an important matter such as tax planning for the last minute? Would a General make a battle plan at the last minute without taking all eventualities into consideration? Haste makes waste is the proverb which comes to mind in such a situation. The loss one would incur with faulty tax planning is too high a cost to bear.
Tax Planning in India:
Think before you invest
Come tax season one rushes to buy an insurance policy in order to avail tax deductions on the premium under Section 80 C up to INR 1 Lakh. This is done just to save on tax irrespective of whether one needs such a policy or not. Any job done without proper planning results in a mess. The same holds true for finances. No financial planning leads to a financial mess. It is too late for a financial advisor to help out after years of indifferent tax planning.
Deductions and their Use in Tax Planning:
The all important Section 80 C
One has heard of the tax deduction of INR 1 Lakh under Section 80 C and rushes to invest in the tax saving instruments without realizing that he has already availed of most of the allowable exemption of INR 1 Lakh in the deductions.
One has availed of this deduction in the employee provident fund as well as the premium portion of one’s insurance policy and very little of the INR 1 Lakh is left behind. Most of the time one would invest in a life insurance policy too many and exceed the INR 1 Lakh limit by purchasing insurance policies which do not suit his needs merely on the word of the insurance agent.
Isn’t it very important to check which instruments come under the purview of Section 80 C deductions? One might invest in a tax saving bond such as an REC or an NHAI bond where interest earned is tax free. One does not get a deduction on the invested amount as this instrument does not come under the purview of the Section 80 C tax deduction.
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