How to do Proper Tax Planning| AVOID THESE MISTAKES WHILE PLANNING YOUR TAXES THIS YEAR

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AVOID THESE MISTAKES WHILE PLANNING YOUR TAXES THIS YEAR:-

It's that time of the year again! TIME to save as much income tax as possible before March 31 deadline. It is also the time of year when you are being bombarded by information and advice from all Quarters; family, freinds, neighboues, colleagues, and the internet. If you don't exercise caution, you might act on unsuitable advice and end up making costly mistakes.
Here are five pitfalls that you need to be aware of before you set your tax saving plan in action this year.

1) SAVING TAX WHEN YOU DON'T NEED TO:

While income tax slabs from Rs 2,50,000 that is the first Rs 2,50,000 is not taxable, there is a standard Rs 40,000 exemption for all. Include other components such as House Rent Allowance and Provident Fund, you will find that typically, income over Rs 4,00,000 is acutually taxable. Therefore, check if you really need to save tax. If you don't, direct your savings towards other long term goals.

2) MISUNDERSTANDING SECTION 80C:-

Rs 1,50,000 is the limit up to which you can save tax under section 80C, and not an amount everyone needs to invest to save tax. The amount you need to invest is determined by your annual income and is not the  same for everyone. Keep in mind that even if you need to save Rs 1,50,000 do not resort to taking loans and fall into  a debt trap to save tax. Save how much you can and plan better next year.

3) IGNORING TAX-SAVING COMMITMENTS:-

Your contribution to Employee Provident Fund is a part of the 1,50,000 limit? Similarly, children's tuition fee, home loan interest/principal payment and interest paid on education loan, are also exempt. Make a note of these first and then plan to invest.

4) Relying on life insurance to save tax:
    Buy insurance for what it's meant to do - protect your family financially - and not for saving tax. Keep your insurance and tax saving needs seperate. If you have adequate life insurance covers for yourself and your family,then don't buy a new life insurance policy each year for saving tax.

5) Separating tax saving and financial goals:-
  Tax-saving investments are lomg-term investments and should be part of your overall financial game plan. They are a perfect vehicle for long-term goals.

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