Tax planning is an integral part of your financial plan. It is not just about minimising your tax liability. Tax planning is an essential dimension of wealth creation that helps you let go of any stress related to tax.

As we are about to close one financial year and step into the next, here are a few tax-friendly habits you may want to adopt.

Holistic View

Tax planning shouldn’t be done solely for tax saving, you should make it an integral part of your financial planning. Get an overall picture of your finances – income, expenses, current investments, goals, and your tax slab. Assess your investment options and the benefits that will accrue, including savings in tax.

Section 80C investments

Section 80C of the Income Tax Act is perhaps the most well-known, as it deals with numerous tax-saving provisions. These include Public Provident Fund (PPF), National Saving Certificate (NSC), Equity-Linked Savings Scheme (ELSS), National Pension Scheme (NPS) and home loans. Some of these have a lock-in period. Align these investments with your financial goals which have a longer time horizon, so that while progressing towards your goals, you also save tax.

Other IT sections

In addition to Section 80C, there are some other sections that offer tax-saving deductions.

• 80D
  Health insurance premium paid for yourself and your family.
• 80E
  Interest paid for an education loan.
• 80G
  Donations to recognised charitable funds.

These sections allow you to diversify your investments, thereby spreading your investment risk across different asset categories.

Evaluate your salary

Take a closer look at your salary slip. Analyse what tax-saving opportunities are available to reduce the taxable components of your income. Your company may offer medical reimbursement, house rent allowance, food coupons, education allowance or leave travel allowance. Make best use of these to reduce your tax burden. Make changes to your income break-up at the beginning of the financial year.

Plan ahead

Don’t leave your tax planning till the end. You may end up making hasty investments. You may also miss out on the benefits that you would have earned if you had invested at the beginning of the year. For example, PPF or ELSS will yield more interest through the year if you invest at the beginning and not wait for the end of the year. Hasty investments may also not align with your financial goals.

Tax planning can be a daunting task if financial planning isn’t your cup of tea. However, you don’t have to do it alone. Consult a financial advisor who will partner you in your financial journey, helping you save tax along the way.