If you were to talk to most tax payers during the financial year closing, tax saving ideas would find pride of place in the conversation. After all, most of us start hunting for tax saving options only when the dreaded tax and 1099 deadline is nearing. We hardly think about tax saving in the initial few months of the year. However, with a spate of options available, choosing the right tax-saver in such a little time is quite difficult. Often people may end up buying instruments that save tax but are not suitable for their long-term financial goals.
The correct way to plan your tax saving is to begin now! Here are the reasons why now is the best time to start tax saving for this financial year 2018-19:
Begin Now To Save More
In the Financial Year 2018-19, you can save up a lot for your taxes. If you begin now, you will have a time of at least 9 months to save this much. You can distribute this amount evenly in the remaining months instead of keeping all your tax saving related expenses to the year end and avoid the last-minute burden.
Chose Investments Wisely
The biggest downside of not planning your tax saving in advance is that, in the later months, due to hurry, we goof up our investment choices. These investments neither suit our portfolio nor give us the desired returns in the long run. Also, we keep repenting on the reduced liquidity for years, due to the wrong choice of the tax saving investment.
Investing Early = Better Returns
Heard about ELSS? It is an equity instrument that is best suited for you if you are looking for the shortest lock-in period possible. ELSS is an option that provides an opportunity to save tax for the aggressive investors. It has a minimum lock-in period of three years, but since it is a high-risk investment, it is advisable that you must plan it for at least five years. You can invest in ELSS through a monthly SIP. Most of the people like the concept of SIP as it is a relaxed and convenient way of disciplined investment.
SIP fetches better return when you start early, like now. You can invest small amounts every month depending on your ability and complete your tax saving target by the end of the financial year in the month of March 2019.
Ensures Best Tax Savings
Though we always try to stick to our monthly budget, due to the unavoidable circumstances sometimes we are forced to spend more money than we have planned. In that case, we fail to comply without tax saving goal. But, if you start saving early and distribute your savings target wisely over the entire year, you can imagine how convenient managing this tax saving will be and additionally you don’t miss out on tax saving due to the crunch of funds at the year end.
You Get Your Returns Early
Most tax-saving instruments come with a fixed a lock-in period. If you begin early, while you will obviously have to remain invested for the stipulated period of time, yet your lock-in period will be over earlier compared to if you invest later in the year. Based on your financial goals you can select tax saving instruments with varying lock in periods accordingly.
Optimize Your Salary Allowances To Save Tax
As per existing tax rules, there are various allowances that salaried people can take benefit of. According to tax filing statistics, if you begin your tax saving planning early, you would be aware of your tax outflows and hence will be able to optimise your financial budget. Also, if your company offers you the flexibility you can restructure your allowances if necessary to get the most tax benefit. This would obviously not be possible if you scramble at the last minute to save taxes.
Buy The Best Term And Health Insurance Plans
No matter how many times insurance sellers tell you to spend less time and money while buying term insurance plans, it is better to ignore them simply. Considering how important buying life insurance is for the financial protection of your family, you need a little more time to make a qualified decision.
Also, consider that this is one decision that you don’t get to change every year. Then why not, spend some time in figuring out the best term insurance plan for your family. Same goes for the health insurance plans.
However, last minute buys are more often a wild guess than a qualified decision. So, make sure that you spend ample time to compare and select only the best, and to do that, you need to start early. Hence, start your tax planning now and escape from the heavy tax burden and large deductions.