Most of us start searching for tax savings options much later in the year, in fact, closer to the financial year-end. Please note that this is not a great way to maximize your benefits from various tax savings instruments. The solution to the maximization of tax savings avenues is simple. Just start planning your tax savings early in the year itself. That way, you will also make wealth creation your goal in addition to tax savings. You’ll benefit for sure since you will have a 12-month horizon every year.
Following are 4 interesting tax planning tips for you to maximize your earnings potential while saving on taxes through various available options:
Don’t simply invest for saving taxes, invest for wealth creation:
Be a smart investor. Invest smartly for saving on your taxes. Who is a smart investor? A smart investor is one who chooses tax savings investment options that not only save taxes, but also help create wealth. Smart investors go in for options such as tax saving ELSS mutual funds through SIP or NPS. ELSS funds will not only help you save your taxes, but owing to the equity exposure, they will also create valuable wealth for you to build your retirement corpus.
Don’t just invest in insurance policies, NPS and tax saving mutual funds:
Although insurance policies are important tax-saving instruments, they are not great options for wealth creation. Therefore, it is crucial that you don’t stop your tax savings investment with insurance policies. It is crucial that you consider lucrative options such as NPS and ELSS funds to invest your hard-earned salary income. The advantage you have with NPS is that you get an additional deduction of Rs.50000 over and above the 80C limit. Also, the equity exposure of NPS allows you to grow your money in a safe yet beneficial manner.
Don’t follow others tax saving investment strategy:
Please note that circumstances, nature, financial goals, and future requirements vary with every person. Therefore, there is no use of cloning someone else’s tax saving investment strategy. In fact, it could backfire big time for you. You are best advised to plan your tax savings investments based on your financial goals, risk profile, and income.
Ensure that you claim your expenses to save your taxes:
The Income Tax Act allows you to claim many expenses. Always ensure you claim them to bring down your taxes. For instance, you can claim HRM in case you are living in a rented home for the rent paid. Likewise, you can claim the interest on educational loans for all your children for their higher education. All of this can help save your taxes, which you can plan to invest in long-term growth instruments such as ELSS funds.
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