Tax planning, above all, refers to minimizing the amount payable as taxes. There are various options available to an Indian citizen to optimize the purchasing power of his base income by reducing the amount of tax he pays. There are numerous alternatives available to a person in the form of exemptions and deductions for securing the minimal tax liability.
In many cases, people try to evade taxes by showing less income, not showing their income at all, or various other shady techniques to avoid tax. Now, be it no mistake that even though the government provides for certain exemptions on tax, taking up these dubious attempts to exempt from taxes is illegal, and the actions can be taken accordingly for the breach of law.
Income tax planning is essential to enjoy one’s income to the fullest. It not only helps to increase the disposable income of a person, but it also gives him the incentive to work with an increased motivation because of increased revenue.
The first step towards this is to estimate the amount payable as taxes in advance and to find and evaluate different ways of saving the amount owed or minimizing the tax. Once you get an idea of which option you want to go with, the next step is to look for various investment options. Investments help to save taxes to a great extent.
Once the mode of investment is decided, the money is supposed to be invested accordingly with maximum returns. All the relevant tax, and investment-related documents are to be kept together at one place, securely. Early and timely planning of mode of investments and mode of tax-saving techniques is always advisable to secure the highest returns possible.
Another important method of saving taxes is by keeping track of all the expenses. All the bills are supposed to be kept safely as proof of those expenses. Certain expenses are eligible for claiming deductions while filing for taxes.
It is equally vital to keep checking and evaluating taxes and income. Like there is a possibility of a change in income, and when that happens, it should be made sure that the investment is made accordingly. If these regular assessments don’t take place, likely, a person may not end up getting the maximum benefits.
Also, at the end of the year, it is challenging to look for profitable investment options to save taxes. So this is a year-round process, and things, if left for the end moment, may result in rash decisions, which again may lead to regrets in the future. Sudden choices may or may not be the right decision, especially when a massive sum of money is involved.
Lastly, a responsible person must make sure that he/she files for the Income Tax Returns (ITR) before time to avoid the problems of missing the deadlines. This helps to get the TDS, i.e., tax deducted on source refund in a short period.
To save taxes legally, the person has to undergo a predetermined procedure and hence should start planning well in advance to avoid any rash decisions at the end moment.