Tax planning is very important in India. Especially considering the multitude of direct and indirect taxes that we pay on each and every thing. Our income is tax. The things that we buy with out post-tax income are also taxed. Any salaried person or businessman or a celebrity is always tensed about paying taxes. There is a huge myth in the society that one have to pay huge tax when you grow financially. This is absolutely false thinking. If you plan your finances well you can always save those extra money that you pay as tax. So before starting how to plan your taxes let us just briefly know about what actually tax planning is.
Is this how you feel about taxes?
What is tax planning?
Tax planning is the analysis of a financial situation or plan from a tax perspective. Tax planning is basically a process which the individuals, businesses and organizations uses to evaluate their financial profile, with the aim of minimizing the amount of taxes paid on personal income or business profit. In simple words, Tax planning is the management of your income and taxes so that you can pay the least possible tax and actually save the extra money that you usually pay. Tax planning also differs from country to country. Every country have different rules and accordingly the tax planning is done.
Types of tax Planning
1. Short Term Tax Planning
2. Long Term Tax Planning
3. Permissive Tax Planning
4. Purposive Tax Planning
Now when we know what tax planning is, we need to find out various steps of planning your taxes especially in India.
How to plan your taxes?
1. Start recording and filing.
Start the process of filing all your transaction so that it is easy for you as well as the advisor(if any) to evaluate our income and expenses. This would help you track all your important documents and remind you all the necessary actions taken in the past.
2. Understand the requirements of tax deductions.
Now when you have all the documents and tracking record to start planning your taxes, You must have the knowledge of all the deductions applicable to your domain of income. Also, you should always have supported documents required to claim the them.
3. Examine the tax credits and take advantage of them.
There are tax credits for various activities that we practice. Tax credits help you save taxes. We have tax credits for academics like tuition fees etc, for college fees, for saving for retirements and for adopting a child etc. So we need to identify such tax credits more and more so that we can save our valuable money. Credits are available for a limited time period so make sure you have a proper research of everything so that you don’t miss out any credit and the time against it.
After all these necessary researches you would end up with a reduced tax at the end of the year.
If you are still confused or not able to do it on individual level then you are suggested to take help of financial advisors. You can always opt for FinVizer as they has the perfect blend of experience, knowledge and communication in all their financial planners. For any kind of queries and issues comment down below and we would try to respond to it at the earliest.