10 Tax Saving Mistakes That You Can Avoid in 2019
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
Being disorganized with tax planning ultimately leads to unsatisfactory decisions which can further create a snow-ball effect during a later part of life. The current trend is pointedly inclined towards keeping it as ‘last-minute’ agenda. And there is always some kind of rush towards an end of financial year when taxpayer will make an effort to minimize their tax outgo by investing in various asset-class without examining the validity or competency of the product. Therefore, as tax planning is a long-term course which seeks a discipline trait, the below paras are a few components which should be considered while preparing for the tax plan.
Start Early – Given a multifaceted process of taxation, it is always prudent to start early on your planning and avoid making a last-minute rush. Eleventh-Hour planning has an inclination for an unpredictable result, and thus, increases the accidental of choosing sub-optimal asset-class and also have a tendency of opportunity lost.
Plan Well to Identify Your Tax – The core purpose of your investment should not only be saving tax, but it should also focus on a long-term perspective that offsets your financial dependence especially during retirement. You should avoid making hazard investments without accounting for risk capacity or tenure and so on.
Account in all the Income Sources – The other source of income is frequently accounted on financial products, dividend received or sale of property, which forms a part of another source of income apart from salary. Failing to or understating these incomes can certainly lead to a penalty at later part.
Restructure Your Salary – Our salary is sub-divided under various components such as basic salary, HRA, LTA, special allowance and so on, and their taxability differs from each other. As some components can be claimed as tax-exempt, restructuring your salary accordingly will lower your taxable income.
Do Not Invest in Long Lock-in – Limiting your investment to the traditional instrument with higher lock-in period can reduce your chances of creating wealth on a long-term basis, and also block your corpus from making good use. You should avoid making an investment in such long lock-in period, and investment certain allocation towards the market-linked instrument.
Not Only Investing But Spending Wisely Also Gives You a Tax Benefit – Apart from seriousness on investment, you should also focus on making prudent spending which will also help you to increase your savings.
Do Not Procrastinate – The cost of delaying a decision in financial planning is behemoth which will hunt you at the last moment. You should take advantage of being fast-mover and avoid procrastinating your decision to yield a better outcome.
Tax Saving Should Not Crunch Your Surplus – As an attempt to reduce a taxable income particularly during an eleventh hour, it usually disturbs our emergency corpus to make an investment in a tax-saving instrument. However, it is a wrong approach which should be avoided at all cost.
Seek Professional Help – Just like a health checkup for a better lifestyle, it is also equally important to seek view or opinion of professional advisers to keep financially fit. It will guide you through a detailed course and correct your decision.
Do Not Forget to File Your Returns on Time – It is always prudent to remain ahead or on time which offers an ample space to correct any improper decision. Therefore, filing your returns on time gives you enough interval to crosscheck or re-verify, and avoid from paying an unnecessary penalty.
The dynamic of the taxation further keeps changing year-on-year basis especially in every budget that should be analyzed or understood by every taxpayer to make an informed decision. Further, as both investing and spending plays to a critical part of our savings, it should be given equal importance. The purpose of the tax plan should not be consolidated for saving just a few bucks, but to have a long-term commitment for better financial wellness in tomorrow.