Do you always wait for the eleventh hour to pay your taxes?
Just because 31st March is the last date to pay your taxes does not mean you cannot plan your taxes in advance. You can start planning your tax saving investments in December itself as it will give you enough breathing space to evaluate and make the right choice.
December is a good time to review the salary or business income you have earned for the year, estimate the income in the coming months, and consider potential sources of additional income so that you have a clear idea of your tax liability.
So, looking at your tax planning strategy for the year today will be a very good idea.
Your December review should cover the following points.
- Estimating your tax liability
- Taking steps to utilize your 80C deductions to the fullest
- Checking out other tax saving options through out-of-the-box strategies
Salaried individuals should consider the impact of their bonus, increments, and other additions to their income and prepare accordingly.
Secondly, it’s time to set aside a fixed sum per month towards your 80C investments. Not paying your life insurance premium on time can be a very dangerous mistake for your family’s financial security. Further, you won’t be able to claim the deduction for the amount u/s 80C. Setting aside Rs 10,000 per month will help you have around Rs 50, 000 for paying premiums or advance tax by 31st March.
The third step is to explore tax saving options that may not have been available in the past.
For instance, those making voluntary contributions to the New Pension scheme can qualify for an additional deduction of Rs. 50,000.
December is a good opportunity to review your other investments as well. Simply identifying whether you qualify for these deductions or not will ensure you don’t miss it while completing tax formalities at the end of the financial year.
These steps will help you match investment declarations submitted to your employer to avoid ending up with a huge tax deduction in the month of March:
- Setting aside Rs 10,000 for the next 3-4 months will help you have Rs 40,000 by March for last-minute investments.
- Avoid eating out or incurring other unnecessary expenses for the next 2-3 months. This can easily save Rs 10-15k, you can invest the same amount and utilize your tax deductions to the fullest.
- In the worst case, stick to minimum payments on your credit card and other commitments and use the extra savings to save tax. You can always make it up once the investment proofs are in hand.
Learning that short-term capital gains have resulted in your income being taxed at a higher slab on 15th March will leave you stranded with very little options. Check your additional income in December as it will give you a lot of time to prepare.
December can certainly make your tax saving as merry as Christmas with certain things if you keep in your mind.