As a taxpayer, it is important that you plan and structure your investments carefully keeping in mind the Income Tax Act by which you can avail various benefits of deduction, rebates and exemptions under the law. Instead of looking at tax-paying as a burden, you must gain fundamental knowledge on the subject and choose the right tax-saving plan. Many of us struggle with last moment tax saving plans and hence do not realise the importance of early tax-saving investments.
Tax-Saving in January-March
January marks the beginning of a new year and consists of multiple transactions and investments. Considering the taxation system in India, which forms the backbone of our economy, January plays a crucial role in the life of a taxpayer. The new year also begins with resolutions of individuals pledging to save more and spending wisely.
Moreover, the date to file Income Tax Returns (ITR) just being three months away, taxpayers consolidate their bills and receipts and continuously check on finding better ways to save on their taxes. Even if one has not made any investments in the entire year, they can still avail tax benefits by investing in various instruments after the beginning of the new year. Hence, the phase of the first three months of a new year, from January to March is crucial for tax saving in India.
However, last-minute planning and investments can be tricky. If you fail to assess the investments properly, you might face losses. Moreover, tax-saving should never be the primary goal or any financial investment. Any financial planning should consist of proper assessment of risk profile, financial goals and investment opportunities. And, this can be properly tapped into if you start investing early.
Taking that into consideration, let us look at various advantages an individual can get from early investment planning.
Advantages of Early Investment at Beginning of the Year
- Great Variety of Options
Early investment presents you with various investment options with the help of which an individual can save on taxes and decrease the amount of taxable income. We have listed below some of the numerous tax saving investment options you can choose from:
- Public Provident Fund
- Endowment Plans/Savings Plan
- Fixed Deposit
- Life Insurance
- Equity Linked Saving Schemes
- Employee Provident Fund
- National Pension Scheme
- Unit Linked Insurance Plan
Life insurance has traditionally been a popular mode of tax-saving for risk-averse investors who need insurance with tax-saving. Term insurance is an affordable way in which you can reap the benefits of tax-saving at low premium prices. In today’s digital world, it has been highly convenient to find the best life insurance online as per an individual’s need. For example, you can easily check for whole life insurance quotes offered by your preferred insurance provider and then purchase whole life insurance policies based on your budget.
- Various Tax Saving Provisions as per Section 80
Under Section 80 of the Income Tax Act, especially Section 80C, a tax-paying individual can claim income tax deductions for the eligible options of investment. These provisions empower the taxpayer and encourage him/her to opt for investments which are eligible for tax benefits. Making early investments helps taxpayers in figuring out the exact amount that needs to be claimed.
- Effortless Filling of Income Tax Returns
We all know that chasing last-minute deadlines can result in mistakes. When you make early investments, you are in a better position to fill Income Tax Returns. However, a taxpayer must remember to have all the relevant documents handy to ensure a smoother Income Tax Returns filing process without errors.
- Reap Benefits of SIP
When you start investing early, you can enjoy the benefits of SIP (Systematic Investment Plan), which does not require any lump-sum payments and ensures regular nominal amounts are set aside for investment purposes, which helps you build wealth gradually.
You must distribute your needs and goals among various asset classes. If you are a late planner, enjoying maximum tax benefits might appear difficult, but it is not impossible. To gain profits and protect your earnings from taxes with tax-saving instruments, it is essential to plan and save early. The secret of successful investing is to start as early in the year as possible.
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