Have You Planned Your Taxes?
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April 2015, the start of the new financial year. Now is the time to think and plan your investment strategy for the financial year 2015-16. Drawing up an investment strategy for you and your family for the year 2015-2016 may take a little longer but right now, the most important point is tax planning for the Financial Year 2015-16. To save on taxes for FY2015-16, while you can make the payments for investment etc. any time from now till 31 March 2016, it is always better to start drawing up your financial goals early and start fulfilling your financial commitments. Hence, the first step to do is to prepare a chart of various provisions of the Income-tax Law under which you are required to bring out money to invest or spend and save taxes. Start the habit of saving on income-tax and for that purpose better it would be if you start making payment of your financial commitments for tax planning as soon as possible because a situation might arise in your family whereby in the month of March you are cash starved. Hence, plan right now and jot down various sections of the Income-tax which will result into tax planning for you and start making investments and payments from the start of the financial year itself.
One single activity which I feel is required to be completed in this month itself is for the salaried employees and I strongly believe that this activity must be completed in this month itself. Don’t wait for the following months. The simple formula is to inform your employer about the expected investments which you are going to make for the purposes of section 80C so that the employer will keep this in view and deduct your income-tax for this quarter based on the expected amount of your contribution to various schemes of investment which will result into income-tax saving for you.
The fact remains that you will enjoy tax deduction either as per Section 80C or Section 80D or any other section of the Income-tax Act when you make the investment today or you make the investment at any point of time before 31 March 2016. Still my suggestion to all intelligent readers is that as far as possible, start making investment right now because who knows by 31st March due to some urgent financial commitments you may not have substantial money to carry out your investment to reap the benefits of Section 80C etc. This according to me is one important reason which you should always keep in your mind and start making payments of various amounts to claim your tax deduction within the framework of the Income-tax Law.
In case you are going to make investment in Public Provident Fund to get tax deduction under section 80C, make the investment as soon as possible. The biggest advantage of making your investment right now in Public Provident Account is that if you make the investment, say in the month of April 2015 itself, then you will enjoy tax free interest on the amount contributed in the Public Provident Account for the full year. Otherwise the same amount which you plan to invest in PPF Account by March and if it was till then kept in your Fixed Deposit, then the interest received would have become taxable. Hence, for all those planning to make the investment in PPF Account, they should try to make such investment as soon as possible preferably during the start of the Financial Year itself so that higher tax free interest from PPF Account can be earned by them.
In short, take out some time and assess the money requirement to fulfil your goals of investing during the Financial Year 2015-16 specially for the purpose of tax deduction and thereafter start hunting for the money for such investment so that you do not miss your deadline of investment for getting the tax deduction in respect of the income for the Financial Year 2015-16.
Do not forget to take full advantage of the tax benefits extended to you by the Finance Act, 2015 specially in view of the fact that the total deduction now available for the purposes of Section 80C is Rs 1,50,000 while the deduction for the housing loan interest for the financial year 2015-16 is Rs 2,00,000 while the basic Income-tax exemption is Rs 2,50,000 and Rs. 3,00,000 for senior citizens & Rs 5,00,000 for very senior citizens. Also do not forget to take additional tax deduction on investment upto Rs 50,000 for investment in the Pension Scheme of the Government as per Section 80CCD(1B). .
The author, Subhash Lakhotia, is Tax and Investment Consultant
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