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Minimise taxes with proper financial planning

Indulge in timely financial planning to minimise taxes

For most, tax planning automatically conjures a painful picture of endless balance sheets, confusing formulae and confounding loopholes. However, in reality, planning—and more importantly, understanding—your finances can go a long way in helping minimise needless expenses in the form of hasty and unnecessary last-minute insurance policy purchases.

Starting right

More often than not  the average salaried individual blithely neglects taxes and other financial matters until the last moment. It is then that they hit the panic button and run helter-skelter in search of means to reduce their tax amount. Not surprisingly, this approach often results in them purchasing tax-saving products that do not meet their financial goals. The first and most important step towards making wise tax investments is to start early – preferably in the month of April itself

The 80C mandate

Section 80C of the Income Tax Act offers a maximum deduction of Rs 1,00,000 per annum on investments made in certain tax free avenues. A caveat here, however, is that the purchased financial products should be in line with your financial goals. You also need to take your annual Employee Provident Fund contribution into account while determining the total investment required to save taxes.

The following are some tax saving investment avenues you can consider:

Equity Linked Savings Scheme

With a lock-in period of only three years—the shortest among all tax-saving instruments—this scheme can not only help save taxes, but also provide inflation-adjusted returns. Further, there are no taxes on withdrawals.

Long term infrastructure bonds

Investments in these bonds are advisable for individuals who fall into the Rs 8 lakh tax slab. Investors of these bonds can claim a tax exemption of up to Rs 20,000.

In addition to these, there are several other instruments such as education loans, home loans, medical allowances and stock losses that can help curtail your tax liability. The trick is to start early and invest smartly in products that are best suited to your financial needs.

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