Avoid These Last-Minute Mistakes While Saving Taxes

In any case, there are a lot of errors that one can make while planning their taxes at the last minute. Here’s a list of tips that will help you avoid these mistakes and make your tax-planning easier.

When it comes to tax planning, the first and foremost step is computing your gross taxable income. It may sound surprising but many of us do not take into account all our sources of income while planning for tax.
We consider our primary income sources such as salary or profits from business or profession but more often than not forget about ancillary sources such as income in the form of interest, dividends, royalty received; or property rent received; and also, our net capital gains on assets sold.Calculating an incorrect gross taxable income figure may jeopardize your entire tax planning exercise. You may make mistakes such as overestimating or underestimating the amount of tax-saving investments that are required to be made.

Sometimes, people appropriately take into consideration all their sources of income but do not factor in the fact that some income groups are exempt from tax. For example, a taxpayer may include interest received on PPF as part of their gross taxable income while in reality, this income is not charged to tax. This also ends up in the taxpayer arriving at an inaccurate gross taxable income figure.

The section 80C of the Income Tax Act, 1961 offers several tax benefits that all individuals and HUFs are eligible for. Taxpayers can claim a deduction of Rs 1.5 lakh from their total income under section 80C. It shall be worthwhile to take a look at all the deductions offered on making investments for the purpose of saving taxes. Some of the most popular deductions under section 80C include investment in schemes such as the National Pension Scheme, Public Provident Fund, etc.

The tax planning process cannot take place in fragments. It is not financially prudent to make select an investment only for the sake of saving tax. Even though tax-saving is an essential aspect of financial planning, the tax-saving investment selected but be in alignment with your financial goals. Investors must consider their liquidity needs, expected returns, risk appetite and investment horizon before zeroing in on a tax-saving product.These simple guidelines shall help you navigate the seemingly difficult tax planning process with ease.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.