The tax planning deadline for the fiscal 12 months 2023-2024 is only a few days away, on March 31, 2023. You probably have not but accomplished your tax planning, achieve this now.
While you solely have just a few hours to finish the duty, it could seem too troublesome. However all will not be misplaced. Every of us has some prior commitments, comparable to house mortgage reimbursement, insurance coverage premium fee, tuition fee for youngsters, and contribution to the worker provident fund. Along with these bills that qualify for revenue tax deductions below Part 80C, you may make new investments.
The clock has begun to tick for many who have but to make tax-saving investments to say deductions of as much as Rs 1.5 lakh below Part 80C.
Make a degree of beginning now slightly than ready till the final minute. If you happen to deal with tax planning as a separate train slightly than an integral a part of your general monetary planning technique, it’s possible you’ll find yourself making expensive errors sooner or later.
Nonetheless, on this last-minute rush, there’s a danger of constructing errors that may price you in the long term. So, listed here are a number of the errors that should completely be averted:
5 Frequent Errors that Taxpayers Make in Tax Planning
1. Investing extra funds than required
In a last-minute panic, it’s possible you’ll interact in panic investing or pool more cash in tax-saving investments than is critical.
This has solely a unfavorable affect on future monetary targets. So, it’s finest first to evaluate the taxes you’ve already saved within the type of home lease, schooling loans, home loans, and so forth, after which make investments solely the rest.
To calculate this whole funding quantity, consultants suggest utilizing a dependable online calculator or consulting with a tax specialist.
2. Utilizing Credit score Playing cards to purchase Insurance coverage Insurance policies
If you happen to didn’t start tax planning earlier within the 12 months, you may face a liquidity disaster on the one hand and a March deadline to finish the train on the opposite.
This might compel some low-income taxpayers to make use of their bank cards to buy life insurance policies, for instance. You could have to pay a excessive value in a while. “This might put you in debt.” Bank cards have a excessive month-to-month rate of interest of 3-4 %.
Even right this moment, many individuals are unaware that paying solely the minimal steadiness is inadequate”. It’s best to make use of a credit card as a spending software slightly than a borrowing software – and solely when you’re assured which you could repay it.
3. Not taking account of Investments
Do you really want to start out saving cash on taxes proper now? If you happen to scrutinize your portfolio, you may not even have to. Confused? That is what we imply.
If you’re a salaried worker, your worker provident fund (EPF) contribution will cowl a good portion of this restrict. Some taxpayers find yourself making tax-saving investments to exhaust the Rs 1.5 lakh restrict with out first figuring out whether or not they should make any in any respect.
4. Shopping for Lengthy Time period Life Insurance coverage Plans
Although this can be a widespread prevalence throughout tax season, life insurance coverage brokers seem like working additional time to promote conventional endowment insurance policies this time of 12 months. What’s the explanation? The budget proposal for 2023 is to tax revenue earned on such insurance policies at maturity if the overall annual premium paid exceeds Rs 5 lakh.
Merely put, maturity proceeds from such insurance policies bought after April 1, 2023, is not going to be utterly tax-free below Part 10(10D).
It’s straightforward to fall for such pitches, particularly in the event you’re pressed for time, as a result of brokers promise to deal with all of the paperwork with minimal inconvenience.
Nonetheless, keep in mind that investment-cum-insurance insurance policies have longer tenures and recurring premium fee commitments that you could be not be capable of meet in future years.
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5. Leaving Tax Planning to March
The most important mistake it’s essential to keep away from subsequent fiscal 12 months is finishing the tax-saving train in March slightly than early within the 12 months. Deferring the duty till the top of the 12 months introduces quite a few problems. For one factor, you may not have the funds for in March to make a big funding all of sudden.
Bottomline
If you happen to haven’t accomplished your tax planning for the fiscal 12 months 2022-23 but, it’s best to achieve this instantly. You solely have just a few days left. Nonetheless, starting with the following fiscal 12 months (April 1, 2023), ensure you start your tax planning as quickly because the 12 months begins.
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