The Best Methods Of Tax Planning
What Is Tax Planning?
It’s actually not about filing your taxes on time - it’s about minimising your taxable income by taking advantage of deductions, exemptions & exclusions available under the law.
Why Tax Planning Is Important
Do you really want to pay MORE tax? No, right? Tax planning helps you reduce your taxable income by allowing you to make investments that can be claimed for deductions.
Set, Align And Execute
Set financial goals so you can prioritise your funds. Next, align your tax planning so that your financial goals are also achieved. Then all that’s left is to execute the plan.
The Goal Is Not Just Tax-Saving
While tax planning, you must ensure that your goal is not just tax saving - it should be to invest in the ideal investment option for you, that also offers tax-saving.
Life Insurance Plan
Under Section 80C of the income tax act 1961, the premium paid towards the purchase of a life insurance policy qualifies for deduction up to Rs. 1.5 lakh.
Equity Linked Savings Schemes are mutual fund schemes that invest a large percentage of their portfolio in equity. ELSS investments qualify for deduction under section 80C up to Rs. 1.5 lakh.
Public Provident Fund also offers deductions under 80C. The maximum amount deductible is Rs. 1.5 lakhs. Since it falls under the exempt category, interest & maturity amount are exempt from tax.
National Savings Certificate
NSC qualifies for deduction under section 80C of the income tax act up to Rs. 1.5 lakh. It also provides investors with complete capital protection and guaranteed interest.
Tax-Saving Fixed Deposit
These FDs are also eligible for deduction under section 80C while calculating the taxable income, with a minimum lock-in period of 5 years.
Start Planning And Saving
Now that you are aware of some of the investment tools you can use to plan and save on taxes, you can start your investment journey today!
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.