Has Tax Planning been Completed ? (FY-23)

 Tax Planning Completed  for FY-23?

The financial year will end in a few days. There is already almost clarity on how much tax should be paid on the income earned. Investments will also be completed. Some people wait till the last minute without taking any decision. As a result, there is a need to invest a large amount of money at once. There will be some mistakes in the selection of schemes. In this context, let’s take a look at the precautions to be taken while investing for tax exemption.

What is the tax to be paid?

 This is the first thing to know. See how much tax you have to pay for the financial year 2022-23 (assessment year 2023-24). Know your total income and tax slab. Income from salary, business, interest from deposits, shares, short and long-term profits from mutual funds, gifts, etc. should be calculated. The Annual Information Report(AIR) with the Income Tax Department contains all your income and high-value transactions. Talk to the accounts department of your office and see how much tax you will have to pay. Find out what are the opportunities to save. Some have already been paid in the form of TDS. So, let’s see how much more tax cut there will be in the month of March. Only then can you decide which schemes to choose for investment. You have to look at how much you need to invest to meet the section 80C limit, which calculates the interest paid on the home loan, EPF, life insurance premiums, tuition fees, etc.

Don't Do, if there is no need:

There are many ways to save tax. Which of these to choose depends on your needs. Do not take insurance policies that a high premium even if they are not required. Tax saving is a benefit offered by insurance policies. Other financial plans will suffer if you want to get tax exemption entirely with insurance policies. You can opt for term policies that offer more protection at a lower premium than expensive ones. It is not practical under any circumstances to take premium-rich policies and struggle to pay the premium for the next year.

With a short duration:

Tax saving schemes have a mandatory lock-in period. Investment in equity-linked savings schemes(ELSS) offered by mutual funds should be continued for a minimum period of three years. Five years cannot be withdrawn when tax-saving fixed deposits are made in a bank. Insurance policies also have a fixed tenure. So, if you opt for tax-saving schemes without being aware of the duration. You can’t take it back later.

Revenue estimation is crucial:

The amount of revenue generated in tax saving schemes is also crucial. Returns are guaranteed when savings are made in secured schemes. There are no accurate estimates of returns when invested in market-oriented schemes. Some ELSS schemes offer returns ranging from 10-15%. Tax exemption is available when invested in some schemes. However, the return/interest earned should be shown as  a lump sum of the total income and tax should be paid as per the applicable slabs. So, this aspect should be kept in mind while choosing tax saving schemes.

Only Saving is not enough:

We invest only in safe saving schemes. This means that tax will be saved, but in the long run you will not be able to raise a large amount of money. So, make sure the investments are in line with your financial goals. Your list should be a mix of good savings-investment plans. Only then will the desired goal be fulfilled. Finally, one word. Whatever the plan is, it’s okay. Don’t choose without a complete understanding of it. Make an investment decision only when you have clarity.