Planning Taxes is Yearly Exercise and Not a Year-end Job

Editor’s note: This is a guest post from Sanjay Kapadiaa, CEO,

india_tax_planning_ideas-1574437Investments as a tax planning are of much importance as it has dual benefits of savings of taxes and generation of income. Many persons devote much time in evaluation various options while making general investment decisions which have no tax benefits and take hasty decisions at the year end to make investments to save taxes. One should note that investing can be a periodic activity but tax-planning is an annual exercise and hence can have far greater implications on one’s finances.

A person continues to look at tax-planning as just another annual obligation that must be fulfilled as against necessity for future. As a result, they haven’t fully understood the benefits that the tax-planning exercise can deliver. A person should appreciate the fact that tax planning forms an integral part of their financial planning and accordingly, an adequate amount of time and effort must be devoted towards the exercise. This will give them the opportunity to thoroughly evaluate various options and to work out a beneficial investment avenue.

Another popular reason for a person shying away from the tax-planning exercise is that it is perceived as being too complicated. However, with the online tax computing and tax filing web portals like, tax-planning becomes simple since it provides tax tips, tax planning tools and answers to the frequently asked questions, which helps to save maximum taxes through proper utilization of available investment avenues.

To begin with tax planning, following points should be considered:

1. There are various avenues of tax planning like:

– section 80C (specified investments),- section 80D (mediclaim premium),- section 80CCF (infrastructure bonds),- section 80DD/80DDB (medical treatment),- section 80E (loan for higher education),- section 80G (donation),- section 80GG (rent paid), etc.The most used and favored investment option is section 80C and section 80CCF for the simple reason of their popularity and ease of investments.

2. To start with, a person should find out how much (based on their incomes) they need to invest towards Section 80C kitty and such other tax savings kitty like section 80CCF.

3. Once the investment amount is known, the next step is to get a check on the ongoing investments and contributions that are eligible for tax benefits. Payment of life insurance premium, contribution to PF / PPF, ELSS scheme of Mutual Fund, Tax saving Fixed deposits, etc., must be taken into account, which are also eligible for deduction under overall cap of Rs. 1,00,000/- of section 80C.

4. A person with less risk taking appetite should ensure that a greater portion of their tax-planning portfolio is held in assured return schemes like PPF, NSC and tax-saving bonds. A high risk-taking person can have a portfolio tilted in favor of market-linked avenues like tax-saving mutual funds (also known as equity-linked saving schemes – ELSS) and unit linked insurance plans (ULIPs). Thus, principles of financial planning like asset allocation and investing in line with one’s risk profile are also important & considered while working out investment avenues.

Thus, a person needs to do tax-planning exercise in a more efficient & methodical way and so that he can get maximum tax benefits along with higher returns.

Precautions in claiming refund.

There are basically two important precautionary measures which a person should take care of while filing the Income Tax return if he is claiming refund –

1. While filing the details in the ITR the person should see that his bank details are absolutely perfect. Only operating bank details needs to be given.2. Reconcile the TDS Receivable you are claiming in ITR with Form 26AS from Income Tax website.Thus, If a person takes proper precautions then he would get the refund quickly which would indirectly benefit the person since he would have liquidity in hand to make investment in more fruitful avenues giving higher returns.

About the Author:

taxsum-1768197Mr. Sanjay Kapadiaa is the CEO at a comprehensive online tax-filing portal in India developed by SNK ETax Solutions Ltd. MR. Kapadiaa is a science graduate in Statistics from University of Mumbai and is practicing as a Chartered Accountant since 1987 at Surat and a visiting external professor to the MBA & DBIM students of various universities.

Mr. Kapadia also contributed write-ups, articles in various magazines of BCA, Chamber of Tax Consultants, Newspapers etc. He has presented technical papers and chaired Technical Sessions at various conferences and seminars of ICAI and Tax Bar.
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