Financial PlanningTaxation

Here’s how you can do last-minute tax planning wisely

Posted Gopal Gidwani

The end of the financial year is nigh. You have just received a mail from the Accounts Department of your organisation. The fact that a whole year has gone by has just hit you and you are breaking in cold sweat because you didn’t think of doing any tax planning. Not a happy situation to be in, but hang in there! You can still salvage the situation with these last-minute hacks to reduce your taxable income.

Augment your insurance cover
Although insurance is not something you should buy in a hurry, now is a good time to assess whether or not you have adequate insurance cover. This pertains to both life and health insurance. Most Indians are in fact grossly underinsured, so augmenting your insurance cover is something you cannot possibly go wrong with.

It is easy to buy online term plans immediately without having to go through an advisor or agent. Similarly, you can buy health plans online if you are under the age of 45. Paying premium for the life insurance cover will help you get tax deductions of up to Rs 1.5 lakh.

Prepay a portion of your home loan
If you have an existing home loan, you can save taxes at the eleventh hour by prepaying a portion of your home loan. Any lumpsum payment of your home loan qualifies for benefits under Section 80C of the Income Tax Act. Besides, by making a prepayment on your home loan, you can save on total interest costs and reduce your EMI or the overall tenure of your home loan.

Invest in an ELSS
Equity-linked savings scheme, or ELSS, are tax saving mutual funds. As the name suggests, they are essentially diversified equity mutual funds that offer dual benefits. They help your money grow in the long run and provide the benefit of tax savings under Section 80C of the Income Tax Act. As compared to any other tax-saving instrument, the biggest advantage of ELSS funds is that they offer the shortest lock-in period of three years.

In order to reap ELSS benefits in the last minute, invest a lumpsum in an ELSS of your choice by investing directly through the website of the asset management company (AMC). However, do some research before you invest in an ELSS. Go through several ELSS funds and check their track record before you put your money.

If you decide to invest in an ELSS scheme to save taxes, ensure that the choice of the ELSS scheme is in sync with your risk profile and your overall financial goals. In other words, if you can stomach higher risk for potential greater returns, an ELSS scheme with a mid-cap bias would be more suitable for you. On the other hand, if stability is your concern, choose an ELSS scheme that predominantly invests in large-cap companies such Reliance, Airtel and so on.

To sum up, you still have time to save tax. You can buy an insurance plan or pre-pay your loan. You can also decide to invest in an ELSS because, besides helping you save tax over short-term, they have the potential to provide high returns in the long run.

Related posts:

  1. Stop that tax deduction from your salary right away! “The hardest thing in the world to understand is income taxes.” This is a quote from Albert Einstein, who came up with, probably, the most difficult theory in the previous century — the theory of relativity. Even he found income tax confusing. That said, some simple hacks could help you reduce your tax deductions and […]...
  2. Don’t let taxes get taxing: Your guide to smart tax decisions on your personal loan There’s one word that can make anyone run away or fall asleep – taxes. And that’s unfortunate really, considering how it can affect the state of your finances. Done right, you can end up saving tens of thousands more than the average Joe. For that, however, you need to be knowledgeable. That’s what Vidya thought […]...
  3. An Overview of Tax-saving Mutual Funds Minimizing tax liability is one of the most integral aspects of financial planning. Individuals who fall under the tax bracket seek tax deductions. Section 80C of the Income Tax Act, 1961 allows you to invest in certain financial instruments so as to claim deductions from your taxable income. Some of the tax-saving investments allowed under […]...
  4. Calculation of Income Tax Payable and Filing of Tax Returns for Assessment Year 2012-13 Introduction The process of e-filing of income tax returns is very easy to use and should be the preferred route for salaried individuals and other individuals. Infact filing income tax returns electronically (e-filing) has been made mandatory from Assessment Year 2012-13 for individuals / HUFs who have income of more than Rs. 10 lakhs. In […]...
  5. Benefits of Early Tax Planning Filing income taxes is an annual task that most of us look forward to. You might be tempted to wait until the final call to gather all the necessary information and file your returns. However, planning your taxes early can cut down the stress of paying taxes towards the end of the year and also […]...

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.