The wise pay their taxes on time and plan for it before time. That does not mean one has to necessarily go through the big fat books on taxes!
Knowing a couple of hacks for saving tax can have it sorted for you.
Planning one's taxes means understanding where you are liable to pay tax, getting the taxable amount right and claiming deductions. It is indeed possible to save your hard earned money by investing appropriately and doing that while paying taxes. These five hacks will definitely help in that endeavour.
1. Life insurance benefits
Picking a life insurance is one of the most important financial decisions that we take. The impact of that investment has a direct effect on the lives of those associated with us. Along with it come tax benefits. It is essential that the premium on the policy is paid before March 31 to avail the benefits in a particular financial year.
Getting an insurance hastily to save on tax may not turn out entirely beneficial.
In order to fulfil the primary purpose of the policy, one must put in enough thought and research to pick one that suits well. Hence, it is only wise to start the process early and take time to make that decision.
2. PPF bonanza
Investing in the Public Provident Fund is a smart and breezy way to save on taxes. One can deposit up to Rs 150,000 every year in the PPF account. Not only is the principal amount tax deductible but also the interest amount is tax exempt. This is one tax saving fest you must take part in.
3. Pay rent and save
Under HRA, amount paid as rent can be claimed as tax exemption. So if you are staying in a rented place then make sure you have all the supporting documents and claim the exemption.
Also, if you are staying in a place owned by your parents, then you can pay rent to them and benefit from the same.
However, they are liable to pay tax on that amount unless it is further invested in a tax free plan. That way a family that stays together, saves together!
4. Another incentive to buy a home
Tax deduction can be claimed on the repayment of principal and interest on a home loan. Paying EMIs on time has multiple benefits and now add this one to that.
Remember that every time you pay the home loan EMI, you are saving on tax. Disciplined repayments will also ensure that your CIBIL report speaks positively about your credit history. It's a complete win-win situation.
5. Plan and be organised to save more
Many people consider investing in tax saving schemes after getting a call for submitting the tax saving investment proofs! Investments have to be done deliberately and not hastily.
You can make the most of your investments by doing the planning bit at the beginning of the year.
Secondly, practicing diligence while filing the investment documents throughout the year, will ensure that you don't miss out on any tax deductions and claims.
Be a smart investor by planning in advance and a good citizen by paying taxes on time. These hacks will lead the way. It requires planning and awareness and is definitely worth the effort. After all money saved is money earned!
Illustration: Dominic Xavier/Rediff.com
The author is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India's first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.