Maximize Your Tax Savings with These Strategies

Tax Planning plays a vital role in an individual’s financial growth. It involves strategies to reduce liability and maximize tax savings. Effective tax planning can contribute to increased cash flow and savings, thus helping you meet your financial goals. The major advantage of tax planning is that one can invest the returns generated into various financial tools, like life insurance, ULIPs, ELSS,-linked mutual funds, health insurance, PPF, fixed deposits and so on. To maximize time savings, planning and investing at the beginning of the fiscal year. In this article, find out the best way to optimize your tax savings.

Strategies to Maximize Tax Savings

Here are the top 4 tax planning strategies that can help you increase your savings in the long term –

Evaluate Your Taxable Income 

The first step of tax planning is computing your gross total income i.e. the income earned in a fiscal year before tax deductions or any other deductions. Next, calculate the taxable income i.e. income on which you will be paying tax, by deducting all payable expenses, such as premiums and rate of interest paid on home loans or medical insurance, rent, donations etc. 

Tax planning becomes easy if you calculate the numbers right from the beginning of the fiscal year. This way, you can be prudent while investing and maximize tax savings. 

Be Prudent with Investment Planning

Choose a suitable investment plan so you do not end up paying more taxes. There are plenty of options available under the Income Tax Act 1961 that enable tax savings. National Savings Certificates (NSC), Equity Linked Saving Schemes (ELSS) in mutual funds, and Provident Public Fund (PPF) are the most notable among others. Sections 80C and 80E offer a variety of exemptions to taxpayers. 

Besides, you can also claim tax benefits through mortgage payments, health insurance and life insurance premiums. An experienced financial advisor can guide you the best with portfolio planning, thus ensuring maximum tax savings. 

Keep All Legal Documents Ready 

For a seamless procedure, you must keep your tax-related documents ready. These include the following –

• Form 16/ 16A/ 16B/ 16C, 26AS

• Latest salary slips

• Documents related to interest income

• Home loan statements

• Interest certificates

• Details of share investment

• Proof of tax deductions and investments for claims under Section 80C, 80D, 80E, 80TTA etc. 

File Income Tax Returns Early

Instead of waiting for the last day, filing income tax returns early is important. Not only does it help you avoid late fees and penalties, but also makes sure you get your tax refund sooner. 

Summary

Early tax planning allows more time to assess investments and revenue accurately. The fiscal year starts from April 1 onwards, and most individuals file for income tax returns in March. If you wait till the last moment, you may be stuck with your current liabilities. Start by calculating your gross income and taxable income, and invest in government schemes under ITA Sections. Get in touch with an experienced professional who will be able to help you understand the different aspects of taxation and plan a strategy to reduce liability and maximize tax savings.