If you are one of those who buy investment products at the last minute just to save tax at the end of the financial year, then you are hurting your financial health in the long-term.
A tax saver plan is a meticulous process that must not be done in isolation. It must accompany a more significant investment plan complete with tax saving options that maximize your return. Tax planning must be ideally started at the beginning of the financial year.
Benefits and Importance of Tax Saving
As a responsible citizen of India, you must pay your taxes on time so that your country can grow. However, the government allows you to save your taxes legally, investing in specific financial instruments. This is known as tax planning.
Saving taxes is a crucial endeavour under financial planning is saving taxes. It is this practice where you analyze your financial situation from the vantage point of tax efficiency so that you can invest your resources for maximum return. Tax planning means that reducing your tax liability by leveraging exemptions and deductions as per prevailing tax laws in India.
To plan your taxes, you can use the tax saving calculator to see how to use various exemptions best to minimize your payable tax. At the same time, it also helps you in defining and meeting your financial goals for different life stages.
The key to successful tax planning lies in investing the amount wisely in various tax saving instruments to real most benefits. By doing so, you can receive dual gains, such as a decrease in tax liability and a return on your investment.
In a nutshell, it is advisable that you make small and systematic investments over the year. Use the tax-saving calculator to know how much you need to invest to save maximum tax.
Importance and Benefits of Using Tax Saving Calculator
Gone are the days when you had to sit around with paper receipts to calculate your tax liability. These days, you can use a tax-saving calculator that allows you to calculate your taxes within seconds! You must provide your income and investment details in the respective columns for the online tax calculator.
- Benefits of Tax Saving Calculator
Apart from giving you an instant and accurate result, it also makes it easy for you to build a tax saver plan with appropriate investments. You can access this online calculator to work out how to save maximum taxes in a financial year. What makes this tool robust is the fact that it takes your age and potential income growth into account to help you with long-term financial planning.
- How to Save Taxes?
No talk about the tax saver plan is complete without discussing the exemptions allowed under section 80C of the Income Tax Act. Collectively, all the instruments that fall under this act will allow you to claim up to Rs. 1.5 lakh in terms of deductions. You can invest in popular products like Public Provident Fund, fixed deposits, ULIP, and ELSS, to build a financial portfolio of long-term investments that will not only save you tax but also help you create wealth in the future.
When you are choosing tax saving schemes to add to your financial portfolio, be sure to take your goals as well as tolerance for risk into account.
This is the reason term insurance policy is one of the most common tax-saving instrument that is also the cheapest and risk-free. You can add this product to your portfolio to fulfil your financial responsibility towards your family and ensure their financial wellbeing in case something happens to you.
There isa wide range of online term plans offered by insurers like Max Life Insurance that enable you to compare and review policies online before investing. The best term policy is the one that matches your financial requirements at the lowest premium.
At the same time, if you are looking for wealth creation opportunities and return on investments, then you can choose options like ULIP and ELSS that are relatively riskier but offer high returns.
- Using the Income Tax Calculator to Save Taxes
Want to know how the tax savings calculator works? Use the steps below to understand:
- Choose the financial year for which you are calculating the taxes
- Enter your correct age as the tax liability varies as per age groups
- Click on ‘Go to Next Step’
- Enter your net salary, i.e. salary after you have deducted various exemptions such as house rent allowance, standard deduction, and leave travel allowance. You can also just enter your salary without availing the exemptions if you want to know your tax liability as per the new tax regime.
- Enter other details such as interest income, rental income, interest paid on home loan for self-occupied property
- Click on ‘Go to Next Step’ again.
- Enter all the tax-saving investments under section 80C, 80D, 80E, and 80TTA, if any
- Click ‘Calculate’ to get your tax liability. You can compare your tax liability under both old and new tax regimes.
If you don’t know the investments and taxes eligible for tax exemptions under section 80C, then you are not alone. When you use the tax-saving calculator, it will help you see how much you need to invest to save maximum tax this year. You can use this information to build a tax saver plan that not only saves you taxes but also helps you meet your financial goals.