Tax Saving: Why January Is an Important Month for Saving Tax?

As a taxpayer, you should plan your overall finances carefully. You can plan and structure your investments keeping in mind the Income Tax Act and avail the benefits of deductions, exemptions, and rebates available under the law. Rather than looking at taxpaying as a burden, you should gain basic financial knowledge and choose the correct tax-saving plans .Most of us struggle until the very last moment to plan tax saving, and we don’t realise the importance of early tax-saving investments. However, you can potentially earn higher returns if you start investing in January itself. If you start saving from the beginning of the month, then you might get a clear idea of where to save your tax before the end of the financial year. In order to avoid the last-minute hassle, you should choose a correct investment plan and save your taxes in January itself.There are several investment options available on the market that could help you save taxes.

• You can consider investing in mutual funds or ULIPs (Unit Link Insurance Plan) to get additional tax benefits along with the returns on your investment.
• You can also choose to invest in schemes such as ELSS (Equity Linked Saving Scheme) which has a lock-in period of 3 years but ensures tax benefits.
• If you start early in the year, you can safeguard yourself from the last-minute rush in the month of March.
• You can also avail the benefit of SIP (Systematic Investment Plan) wherein you have to pay the amount periodically rather than investing the whole amount at one time. The period of time in which you can invest in SIP could be weekly, monthly, or quarterly. So, planning to invest in SIP at the start of the year can be beneficial.
• January being the start of the year can be your time to study the various investment plans before the rush to invest sets in during March. While not certain, January often tends to be good for stock markets, as seen in January 2019, which was the best in the last 30 years.

If you are a late planner, you might not get to enjoy the maximum benefits in tax saving due to the notional loss but can minimise the same if you save early. Every taxpayer should realise the importance of tax saving. However, it is vital that your investments for tax savings depend on your financial needs and goals.You should distribute these needs and goals among asset classes to get maximum benefit for lowering your tax burden as well as building your financial resource. You can also consider other investment instruments, which can be claimed under Section 80 of the Income Tax Act. The key is to start investing as early in the year as possible.Ready to make the most of your money? Start your tax planning journey now!

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.