Tax Planning: Early Bird Gets The Worm

As we bid adieu to yet another financial year, tax planning would have been a crucial part of your financial strategies. Avoiding tax planning mistakes permits you to systematically make investments while reducing tax liability. Vardan Pandhare breaks down the tax planning mistakes you should avoid in the upcoming financial year

- Vardan Pandhare

A famous Morgan Stanley advertisement of 2006 grabbed a lot of attention for its punch line which stated, “You must pay taxes. But no law says you have to leave a tip.” For the investor community, it highlighted the importance of not neglecting the opportunity to lawfully save on taxes. As you are aware, the lower amount of tax you pay, the greater your disposable income is. Quite often, many investors unknowingly make some common mistakes while planning to save their taxes. In this special report, we will discuss such mistakes that must be avoided and provide suggestions to rectify them.

Start Early

As a cricket-loving nation, we all know that only M S Dhoni can turn a match in the last over and win it for India. But it is observed that tax planning is something that a lot of investors put off until the fourth quarter. Many investors wait until they are asked by their employers to produce Section 80 C and other investment evidence for tax deducted at source (TDS) reasons before starting their tax filing. The last-minute hurry to make tax-saving investments before their employers’ deadline prevents them from giving these investments more thought or connecting them to their financial goals.

Investors frequently make sub-par tax-saving investing choices that they regret at a later stage. At the start of the fiscal year, a majority of salaried investors are aware of the fixed portion of their pay. Additionally, you are aware of the interest rate on your current bank fixed deposits. This is a really good time to start and you can begin your tax preparation in April. It will ensure you have enough time to thoroughly plan your investments and choose the best ones. Therefore, avoid the error of delaying your tax planning until March. As soon as you can, flag off the process.

Take a Long-Term View