Tax planning is the way of analyzing one’s financial situation and making sure to reduce one tax liability in any given financial year. This makes you know and utilizes the tax exemptions, deductions as well as benefits offered by the authorities.
DIFFERENT TYPES OF TAX PLANNING:
In general, tax planning is a part of financial planning and there are different types of tax planning.
- Short-term planning comes at the end of the financial year in terms of reducing/ limiting the tax liability.
- Long-term planning starts at the beginning of the financial year. However, the tax benefits take time and don’t get started like short-term tax planning.
- Purposive planning in general brings out the tax exemptions in keeping up some specific purposes in mind. Such purposes assure you to get some benefits out of that investment.
- Permissive planning offers various provisions namely exemptions, deductions, incentives, etc.
HOW TO SAVE TAXES & ADVANTAGES OF TAX PLANNING:
Taxpayers are provided with various options to save taxes, out of which Section 80C is the most benefited one. Under this section, you can save your taxes by investing in years PPF(Public provident fund), 5 years Deposits, ELSS Schemes. You can save up to a maximum of Rs.46800(by assuming the highest slab of income).
The major advantages of this effective tax planning are reducing the tax liabilities and arranging the tax benefits that come under the Income-tax Act, 1961. It offers various investment schemes for your tax savings.
Economic stability is also a major reason under tax planning to help regulate the flow of white money in the country. And also the country’s progress gets better. Finally, tax litigation issues come under control. This means any disputes with local, federal, foreign tax authorities as well.
Therefore, apart from the above-mentioned factors, tax can be saved in other different ways namely donations to charities and also opt distinct saver mutual funds. Wish you Good luck!!