Waiting for the year-end to start planning your taxes? You might be wrong. Tax planning should be done as early as possible.
When it comes to tax planning most of you delay your online tax preparation process either to the last financial quarter of January-February-March or to the last financial month of March. Why to begin tax planning early in the financial year when you have to file your returns after 31st March, right? Wrong!! Have you ever heard the saying – ‘The early bird catches the worm’? The same philosophy holds true for tax planning in India. It should be started as early as possible. In fact, experts suggest that from April of the new financial year itself your tax planning process should start. Do you know why?
The answer is simple. Starting early gives you many advantages in planning your taxes in an effective manner. Here are the advantages which you can get –
- You can pick the right tax-saving instruments
The fundamental tax planning strategies say that you should choose those investment instruments which not only help you in saving your tax outgo but also fulfil your financial goals. This can be done when you have time to assess your financial goals and then choose tax saving instruments suitable for such goals. When you delay tax planning to the last moment, you scramble to invest in any instrument which helps you in saving your tax outgo. You don’t have the time to assess the instrument’s suitability to your goals and often pick wrong instruments. To avoid investing in wrong avenues tax planning should be started early on. You would have the required time to first plan for your goals and then your taxes.
- You can get the maximum tax saving advantage
When it comes to avenues offering tax saving benefits, there are other choices too apart from the very popular Section 80C investments. But, due to last minute tax planning you tend to overlook other tax saving avenues and end up paying a higher tax. Starting early helps you avoid this situation. You can consult expert tax consultants in Mumbai when you start early and find out about all possible tax-saving avenues available to you using which you can save your taxes.
- You can earn higher returns
Let’s take the example of two of the most popular tax-saving instruments – ELSS and PPF schemes. You can either start investing in SIPs of ELSS schemes from the starting of the financial year or you can delay and invest in one lump sum at the end of the financial year. Similarly, for PPF schemes, you can either invest at the starting of the financial year or at the end. In both the cases, when you invest in lump sum at the end of the financial year, you lose the returns which could have been earned over the financial year if you would have invested regularly every month. Moreover, in case of ELSS schemes, SIPs are better than lump sum investments as they give you the benefit of rupee-cost averaging, smoothen out the market volatility and earn higher returns. So, delaying tax planning also reduces your return earning potential.
Given these main benefits, what do you think is the right time to start tax planning?
There is no time like the present for your tax planning needs. You should undertake tax preparation services as early as possible to get the above-mentioned benefits. Delaying has never proven beneficial, has it?