Earning money is what anyone can do but it takes a smart brain to save it. Rather than compromising the desires, one should take a more simpler way, that is through tax saving deductions to reduce the tax burden. Tax planning is what needed to be considered before the beginning of the financial year but most of the people tend to make the investments in the last quarter. When the time runs short then are born mistakes, out of hurry. Here are some mistakes which the tax payers often make in hurry along with some solutions while making last-minute investments.
TAX SAVING
- Insurance Plans
Tax saving can greatly be achieved by making investments in life insurance schemes like Endowment plans. One should never invest large amount of money in Endowment plans alone. Drawback being that they are long term plans within the range of 10-20 years, with a constant investing. Common mistake, often committed by taxpayers in hurry.
However, the remedy would be to invest in term plans, which qualifies for tax deduction under Section 80 C.
- Tax-exempt expenses
Ignore the small things today and be ready to face larger problems tomorrow. People never pay attention that health insurance, children’s tuition fees, house loan payments etc. qualify as valid tax deductions. Non-declaration of which cause them to pay more tax.
Remedy: Information is the key. Qualified tax deductions should be known to all. Claim all the deductions you can while not just only focusing on Section 80 C benefits.
- NPS
Not just one’s own savings but also employers contribution to NPS up to 10% of the employee’s salary qualify for tax deduction under Section 80 CCD(2). Including NPS in your salary often wrongly deemed as a hefty task but it is not so when its benefits are made known to an employee.
- Rajiv Gandhi Equity Savings Scheme and Infrastructure Bonds
Investors with an annual income up to Rs 12 lakh can claim the benefits under RGESS under section 80 CCG. It would get the investor a deduction of 50% of the investment amount above 80 C limit for first three consecutive years.
- Five-year Bank Fixed Deposit
Eligible for deduction under Section 80C, another popular way to ensure tax deductions. People tend to invest in fixed deposits but the interest rate is quite low and also the interest earned is taxable which makes it a problem for tax-payers.
However, PPF(public provident fund) is a better option considering the higher interest rates and exemption of interest income from taxation.
When asked from experts, they always emphasize on planning the tax according to one’s overall portfolio. One should never put his money blindly in any asset. Planning is required in proper investment, it should never be taken light handedly. Plan the tax-saving investments before the start of the year, never leave them for the end moment. Always keep in mind, hasty decisions are the reasons for one’s destruction.
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