You open your to-do list for the day and there it is! The one reminder you’ve ignored for weeks (or months) saying “Complete Your Tax Planning.” But today is the last day of submission of investment proofs! Yes, this can be procrastination fatigue, but know that if you complete your tax planning right. All the mistakes on tax planning and how you can save money on taxes where you find the correct information.
Mistake # 1: Not educating yourself on taxation:
“The most important investment you can make is in yourself.” – Warren Buffet
No, you don’t have to study for hours on end and become a tax expert to use our tax services. We just insist that you know the basics so that you can best help yourself. It’s just like an investment- it will pay you back big time in the long run.
You can read a few tax articles every weekend. Make sure to work at it slowly over time, and you will notice the difference. Your confidence in your tax choices will grow as well.
Mistake # 2: Waiting for the last minute to do the tax planning:
It’s risky because you might end up making investment mistakes, but they probably won’t pay the price that it costs you.
It’s very possible that in the future, investments you had made will no longer be worth the same amount. This can be prevented and often it’s not too soon to start planning what the investments will be. Time is a luxury and it’s never too soon to act on what investments you do want.
Mistake # 3: Not being clear on your own financial goals: Nowadays, there are lots of options when it comes to tax-saving investments. If you don’t know what you need, it can be a confusing process and it can make all the difference.
Don’t just do your taxes for tax reasons…It should also help you plan your financial goals and grow your wealth… For example, for a required money in the next 8 years, you DON’T invest in PPF with a 15 year lock-in…Or for your retirement that’s 30 years away & is low on funds, an investment in tax-saving FDs is also not a good choice
So, follow this three-point approach:
- create a budget
- Action step: Create a list of your financial goals
- keep in mind the financial goal
Mistake # 4: Investing in a business without understanding the underlying features can put you at risk for making poor decisions.
Apart from financial goals, you also need to evaluate any tax saving investment on the following parameters:
- Liquidity: Should you need access to your funds for a financial goal, Robins Assoc can help. They have no lock-in periods, and there are no penalties for over-funding.
- Risk: Some investments fluctuate in terms of their cash flows, for example, equities. This can lead to future returns that beat inflation.However, it is important to ask yourself if you are comfortable with this kind of volatility. in tolerating some volatility? How much equity can I invest & sleep comfortably? The difference between sleeping and sleeplessly is a huge one and not
- Taxability: Consider investing in an ETF or mutual fund like Fidelity’s New Income Fund to minimize the impact of income caps on your tax bill. As long as you can control one key factor and ensure a high degree of engagement, you should do just fine when it comes to controlling your tax equity.
Mistake # 5: Sticking to old & inefficient tax-saving avenues
Many people don’t consider the investment portfolio that they fund over time and discover it is skewed towards low interest-yielding investments, for example LIC policies. This can be attributed to parents and grandparents who may have not considered tax planning when setting up their estate.
It can be hard for our parents to relate to the changes in modern life, but they might be surprised by how quickly people have adopted this new financial landscape. The job market is tougher and inflation for education is more than 30%, but people are pretty used to it now. We try not to focus too much on the past and think about how we can make things work for
The idea of safe avenues like bank deposits, fixed deposit schemes, FDs & ETFs may seem enticing now but they fail to beat inflation in the long-run. They also don’t offer newer avenues which are tax saving. Some of these newer sources include well-known equity mutual funds, NPS plans and other such investments that have the potential to generate a
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