In most cases, individuals start looking for tax-saving products only when their employer sets a deadline for submission of the documents. In such a scenario, you are in for a financial disaster.
Most salaried individuals keep their tax planning for the last minute. In fact, in most cases, individuals start looking for tax-saving products to invest only when their employer sets a deadline for submission of the documents. If such a scenario plays out in your working life year-after-year, you are in for a financial disaster. In a hurry to meet the deadline, most people end up buying wrong financial products. One of the worst money mistakes is to buy financial products that you don’t need.
Here are a few factors you need to consider especially when we step into the last quarter of the financial year.
Make the most of the Rs 1.5 lakh deductions u/s 80C
One of the biggest mistakes which most people do while tax planning is that they fail to utilise the complete deductions of Rs 1.5 lakh under Section 80C of the Income Tax Act. Some of the most common deductions claimed under this section are:
# Premium paid for life insurance policy
# Investments in PPF, EPF and VPF
# Repayment of principal amount of housing loan
# Investment in equity-linked savings scheme (ELSS) of mutual funds
# Investments in certain post-office schemes like Sukanya Samriddhi Yojana (SSY), National Savings Certificates (NSC), Senior Citizens’ Savings Schemes(SCSS)
Hence before you move forward, make sure that you have made the most of Section 80C.
Find out whether you can claim additional deduction
Most of the people are unaware that 80C is not the only section under which you can claim deduction. Moreover the limit of Rs 1.5 lakh can also be extended. The total investment amount under the Section 80C, 80CCC and 80CCD (1) cannot exceed Rs 1.5 lakh as per rules for FY17-18. An additional Rs 50,000 can be claimed as deduction if the investment is made in the National Pension System (NPS) in which case the maximum deduction amount that will be available is Rs 2 lakh.
Organize your records for tax time
Good organisations may not cut your taxes. But there are other rewards, and some of them are financial. For many, the biggest hassle at tax time is getting all of the documentation together. Therefore, if you need some help in organizing your tax records, you should follow these simple tips:
# Print out a tax checklist to help you gather all the tax documents you’ll need to complete your tax return.
# Collect receipts and information that you have piled up during the year.
# Group similar documents together, putting them in different file folders if there are enough papers.
Ensure that you file your returns electronically
Filing returns online has several benefits. Electronic filing works best if you expect a tax refund.
Online filing of form can be done from anywhere, anytime. You are not constrained by time or place. Besides filing returns ensures confidentiality of data, unlike a paper format where access to your financial information can be compromised.
Decide if you need help
If you are struggling with getting your tax planning in order till the last moment, there is a pretty good probability that you might end up making some mistakes or miss out on a detail. Hence, a smart move to make right now would be to get in touch with a financial advisor or a chartered account and figure out how to better the plan your taxes.
(By Rahul Jain, Head-Personal Wealth Advisory, Edelweiss)