Tax planning remains one of the most daunting and tedious tasks for most salaried individuals. This is because even a small mistake in planning your income taxes may make a dent in your otherwise sound finances.
Quite naturally, a large fraction of salaried individuals is often in a lookout for iron-clad and quick tax planning tips in order to do income tax planning in a way that it doesn’t really leave them in a lurch during the tax season. If you too have been looking for such quick tips, you are in a for a treat.
We have carefully compiled a short list of 5 quick tax planning tips to help you save your salary from getting depleted while paying your taxes.
Tip 1 –Section 80C is Your Best Friend
Section 80C can help salaried individuals save a sizeable amount of their salary. In fact, there is no bigger section than Section 80C when it comes to taxation of salaried people.
It makes sense to carefully mull over the income tax savings options under Section 80C in order to reduce the tax liability and minimize the earnings. Under Section 80C, one can avail tax exemption of as much as Rs. 150,000.
Tip 2 – Kick Start by Saving Rs 150,000
As discussed above, you must carefully look at Section 80C and try to avail the tax exemption limit of Rs. 150000 under this Section first. Consider some of the most common yet lucrative options such as life insurance, Public Provident Funds (PPF), Tax Saving Mutual Funds, National Saving Certificate (NSC) and much more. Carefully choose one of these options depending upon your future financial goals, income, and requisites. Do seek the help of financial planners to know how to maximize your profit using these investment instruments.
Consider some of the most common yet lucrative options such as life insurance, Public Provident Funds (PPF), Tax Saving Mutual Funds, National Saving Certificate (NSC) and much more. Carefully choose one of these options depending upon your future financial goals, income, and requisites. Do seek the help of financial planners to know how to maximize your profit using these investment instruments.
Do seek the help of financial planners to know how to maximize your profit using these investment instruments.
Tip 3 – Remember Important Options
While it may seem lucrative to invest in many investment instruments that may help you save under Section 80C of the Indian Income Tax Act, it makes sense to carefully mull over the instrument that you believe will help you in the long run. Investment instruments such as life insurance, EFP, and PPF are just some of the many options that remain a must have for any salaried individual, even if they are not investing for taxation purpose.
Investment instruments such as life insurance, EFP, and PPF are just some of the many options that remain a must have for any salaried individual, even if they are not investing for taxation purpose.
Tip 4 – Remember ULIPs, Pension Plans & Tax Saving Mutual Funds
Now that you know that you must carefully look at options that are an immense benefit even in the farther future, it’s time to move on to the next level of income tax planning.
Do remember to invest in ULIPs and tax saving mutual funds to ensure minimum risk, higher returns and in order to avail tax benefits.
In case you are looking to invest in a pension plan to ensure better lifestyle post retirement, you may avail a tax exemption for the premium payments under Section 80CCC.
If you choose to invest in NPS (New Pension Scheme), you can avail tax benefits of as much as Rs. 50000 under the Section 80CCD of the Indian Income Tax Act.
Tip 5 – Home Loan Benefits
If you have taken a home loan to finally get a roof of your own, you can claim a tax exemption on the same as well under Section 80C of the Indian Income Tax Act.
In addition, you can claim tax exemption on the interest payment of your home loan under Section 24 of the Indian Income Tax Act. Under this section, maximum tax exemption of Rs 2 lakhs on the interest for loans can be availed.
If you have taken a home loan for the first time, you can avail an additional exemption of Rs. 50,000 on the interest being paid towards your home loan under Section 80EE of the Indian Income Tax.
However, to qualify for this exemption, your loan must have been sanctioned in the financial year 2016-17 and the total loan amount must not be more than Rs. 35 lacs.
Furthermore, the total value of the house must not be more than Rs. 50 lacs. It is also mandatory to have the house registered I the name of the assessee.
5 Tips for Saving Money When You Have Low Income
Set Your Goal: First things first, set a financial goal. Figure out what exactly do you want from your investments. Do well to carefully mull over a timeframe of the investment and the extent of your return.
Remember, it is important to devise a fool-proof financial plan, you will not be able to devise a rewarding financial plan that can help you save a sizeable amount of taxes too.
Figure out How much to Save: Any investment that you are doing must be in complete liaison with your income. Never invest an amount that surpasses your current financial requirements.
If you doing this, sooner or later, you will end up burning all your savings and you may also be forced to give up your investment. This will cost your lot of headache and a sizeable fortune.
Figure out your financial liabilities first and then in accordance to that, go ahead with your investments in term insurance, mutual funds or tax saving plans.
Compare Before Investing: There are hundreds of investment plans available at one’s disposal today.
Therefore, it makes sense to carefully analyze the pros and cons of buying an investment insurance product, before investing.
Compare your intended investment policy with other plans for features, benefits and the premium amount. Don’t buy an investment plan, just because someone else has bought it. Remember, your financial needs, requirements and goals would be different from others.
Seek help from popular web insurance aggregator sites such as policybazaar.com
Get Acquainted with The Risk Involved: A fair share of investors, especially those with low income, remains apprehensive and reluctant investing in market-linked investment schemes.
They believe that all such investment plans have a huge level of risk associated with them. However, not all market–linked investment plans prove to be a risky proposition.
Remember, if you are looking to take calculated risks, you will need to select market linked investment plans that offer good returns on low investments.
But when investing, be careful of investing a small part of your funds in such plans and reap good returns.
Diversify Your Investment Portfolio: The best way to save money for people with low income is to diversify their investment portfolio. Smartly scatter your money in different investment plans such as life insurance, equity bonds, tax saving plans, mutual funds and much more.
By diversifying your investment portfolio, you will be able to ensure that your investments give you good returns. Doing so will help you get a good return on a particular investment, even if others do not really perform well.
This will help you ensure a steady follow of profit from your investment. In addition, do well to get acquainted with best deals in the market to save and multiply your wealth manifolds.
Remember, saving money needn’t be a tough job! All you need to be is careful and smart when investing. But when making way for investments, don’t compromise with your financial liabilities and necessities. Keep in mind, only a happy and content mind gets lucky in life as well as investments.
Over to You!
With these 5 easy to follow income tax planning tips, we are sure you will be able to ensure tax saving and also score sizeable savings to help them carve a better financial future.
So what are you doing to plan for your taxes a salaried person? Share your thoughts below.