What is tax planning?
Tax liabilities can create a dent in your annual savings targets. To counter such instances, you can consider planning your taxes to save more and reduce your income tax liabilities. By availing of the tax deductions and benefits on various schemes like PPF, ELSS, health insurance, standard deduction, HRA, etc you can save more and be more tax efficient.Â
Importance of tax planning:
Tax planning is not just a year-end liability, it is a focal part of financial planning. Tax planning ensures you save your taxes while following the requirements of the income tax act, of 1961. While navigating through investment options, we prefer investing in the ones that give us tax benefits. Thus, tax planning when aligned with planning can help you save more as well as mitigate your tax liabilities for the long term. Â
Types of tax planning:
People most often believe paying and filing for taxes only help in reducing tax liabilities. But, tax planning has more to it. It can also mean investing in securities at the right time to reach your financial goals.
Here are some of the types of tax planning in India:
- Long-term Tax planning
- Short-term Tax planning
- Permissive Tax planning
- Purposive Tax planning