5 Things about Taxes you might be getting wrong

Taxes are an essential part of every working individual’s life. Many professionals are likely to pay taxes on time, especially when they have their finances sorted, as per Income Tax Act, 1961. While most people can file ITR on their own, some of you might still be unclear on planning your taxes, which is why you must be afraid that you might end up making mistakes.

Before you begin your tax planning on the wrong foot, let’s look at these top five mistakes about taxes that you can avoid easily:

  1. Starting Tax Planning Quite Late

A sound financial plan is incomplete without tax planning. So, it will be best if you start planning your taxes as you plan your short-term and long-term financial objectives. By this, we mean that you should begin filing your tax as early as possible instead of waiting until the very end of the financial year.

Starting early on tax will allow to you plan your finances ahead in the year. In addition to this, you will have enough time to list down all the deductions that you can claim during the said financial year. This way, you will be able to eliminate the pressure of tax planning at the very last minute, which, in turn, might result in no errors.

  1. Failing To Keep Track Of All The Expenses

Expenses tend to vary from person to person. For every individual, the daily expenses can range from groceries to rent and utility payments. The costs that you (the investor) incur on your day-to-day basis can allow you to save taxes.

Expenses, such as school fees, registration fees of the property, medical expenses, etc. have the potential to reduce your tax liability at the end of every financial year. So, it is essential to keep a tab on these expenses throughout the year. This way, you will be able to save more money on tax over time.

  • Investing Only For Tax-Saving Benefits

In the market, there are several investment instruments, such as Equity Linked Savings Scheme (ELSS), Unit Linked Insurance Plan (ULIP), Public Provident Fund (PPF), and so on, that provide tax-saving benefits. While we understand that tax saving is one of the beneficial reasons to invest in such options, your investment decision should not solely be based on it.

One of the common mistakes most investors make is to invest solely for tax saving. When you do so, you fail to analyse other essential factors, such as returns, risks, lock-in period, etc. There is more to investment than just the tax benefits. Rather than only looking at it from a tax-saving perspective, it is best to conduct in-depth research on different investment options in the market and invest in a tool that aligns with your future financial goals.

  1. Avoiding Risks And Liquidity

Planning your taxes at the last minute may not let you make the best use of your money. Generally, you might end up investing in a convenient option and not a plan that best suits your future financial goals. If you are a risk-averse investor, you might choose traditional investment tools, such as PPFs or fixed deposits due to its convenience and stability.

It is essential to make investments that reduce your tax liability as well as allow you to build your wealth over time. One such type of an investment instrument is ELSS mutual fund. It is an excellent combination of tax-saving benefits, better returns, and offers great flexibility to the investors. When you invest in ELSS funds, you can liquidate your assets after three years in the case of any financial emergency.

  1. Claiming Wrong Deductions

Depending on the investments and other financial liabilities, each individual may be eligible for several deductions under different sections of the Income Tax Act. Also, the tax rules are different for self-employed individuals and salaried employees.

For business owners who dedicatedly work from their home can claim a specific percentage of the house dedicated to the business activity as a tax deduction. Anything claimed beyond can be suspicious. So, it is essential to check the rules before claiming it.

In a nutshell, it is of utmost importance to understand all the investments and expenses that you might be eligible for when filing your ITR. Along with this, make it a point to start your tax planning early in the given financial year. This way, you can save yourself from the last-minute hassle and plan your taxes in a structured manner.

Comments

Post a Comment

Popular posts from this blog

Top features why a dedicated WordPress hosting is best for your website

Dedicated servers are often looked upon as over-expensive web hosting solutions. You may consider them an overkill for your business, but there is no denying the fact that they are the best hosting solution out there. Today, we will tell you some features of a dedicated WordPresshosting that makesit the best for your business. Reliability This is the key factor why most businesses choose a dedicated WordPress server hosting to host their website. A dedicated WordPress hosting server is administered and maintained by a team of professionals who provide online support and work towards optimising the performance of the server. Unlike shared and VPS hosting plans which give you access to limited resources, dedicated server hosting provides a good hosting support. This in turn increases the reliability. Scalability Every business aims to grow their customer base and increase revenues. However, with the limited resources provided by theshared hosting, it can be challenging to handle the high...
Read more

Elon Musk's "Use Signal" Post Spurred Massive Rally For The Wrong One

A two-word app recommendation from Elon Musk has turned into a massive rally in the shares of a tiny medical device company in another case of mistaken identity. “Use Signal,” the Tesla Inc. chief executive officer wrote on Twitter on Jan. 7, apparently referring to the encrypted messaging service. By the end of the day, Signal Advance Inc. shares had surged more than sixfold. That was enough to push Signal Advance’s rally more than 5,100% in three trading days giving it a market valuation of $390 million. Despite reports about the confusion on Friday, the stock has continued to rally. Shares of the Rosharon, Texas-based company surged as much as 885% on Monday before paring the gains. “We strongly recommend people do their due diligence and always invest with care,” the company’s chief executive officer, Dr. Chris Hymel, said when reached by phone on Monday. Signal Advance doesn’t have an association with Musk or the Signal app, he said. Signal...
Read more

RBI Policy: MPC may keep policy rate unchanged at 6%; owl may sound hawkish

N- Urjit Patel, Governor of the Reserve Bank of India (RBI), and his five colleagues on the Monetary Policy Committee will not find it too hard to keep the key policy interest rate unchanged at the upcoming policy review on February 7. The 2-day deliberations on February 6 and 7 by the MPC on the repo rate decision are expected to remain tilted towards a pause mode, keeping the near term outlook hawkish. However, they may raise rates later given the risks of higher inflation with fiscal slippages and higher food prices with the government planning to increase the Minimum Support Price (MSP). In the Budget last week, the government promised to ensure MSP of key crops at 1.5 times the cost of production. This could mean at least a 50-70-basis-points increase in the headline inflation number. While banks and bond markets have already signaled the end of the interest rate easing cycle, the MPC may keep the repo rate unchanged at 6 percent. Inflation risks Although, experts suggest the infl...
Read more