While the financial year ends, it becomes important to pay your taxes. This is a period when mostly employed individuals have to submit a tax declaration to their companies. However, in order to comply with the necessary tax formalities, people tend to make mistakes in a hurry. In this blog, we will discuss a few common tax-savings mistakes to avoid and some tips to maximize your tax-savings.
Not Keeping Track Of All Expenses
Many people are ignorant towards their expenses. They do not know that expenses such as house rent, insurance premiums, education loans are also eligible for tax deductions. Therefore, they don’t declare these expenses and as a result pay more taxes.
It’s essential to keep a record of all expenses throughout the year, including work-related expenses, medical bills, charitable donations, and education costs. Stay informed about all the expenses that are valid for tax deductions and other tax-saving avenues.
Investing in Wrong Schemes
Mostly people invest in schemes like long term fixed deposit returns in india (FD) or National Saving Certificates (NSC) thinking that these are tax saving schemes. However, the interests on these schemes are taxable. This makes such schemes not appropriate.
Instead, look for efficient tax-saving schemes like PPF where investments are eligible for tax deduction and interest earned is tax-free. Additionally, you can go for tax-saving mutual funds and invest in debt funds. This will help you to build the correct portfolio and save more.
Missing The Tax Filing Deadline
Many people wait for the tax declaration until March. But, it is better to start tax-planning and financial planning india a little earlier. Failing to file your taxes on time can lead to penalties and interest charges. It’s best to file your taxes as soon as possible, even if you can’t pay the full amount owed. This will also save you from putting a lot of money in taxes later in a year.
Not Seeking Professional Tax Advice
Tax laws are complex, and it can be challenging to navigate them on your own. Seeking the advice of a professional tax accountant can help ensure you’re taking advantage of all available tax breaks.
Lack of knowledge often leads to shelling out more taxes than required. It is important to know the terms and conditions of tax benefits before investing.
Tips for Maximizing Your Tax Savings
To save on taxes, you must invest in insurances or tax-saving instruments. You can also utilize various allowances to save taxes. Here are some tips you can follow to save taxes.
- Contribute To Tax Saving Investment Options – The premiums paid on insurance policies are eligible for tax deduction. Other tax savings options are PPF, NSC, NPS.
- Claim House Rent – If you are staying in a rented house, then you can claim tax deduction by submitting rent receipts under Section 10(13A).
- Donate To Charity – Charitable donations are tax-deductible, so consider donating to your relief funds or charitable organizations throughout the year.
- Keep Accurate Records – Keeping accurate records of all expenses and income throughout the year can help you identify opportunities for tax savings and ensure you’re prepared come tax time.
- Plan Ahead – Tax planning shouldn’t be a once-a-year activity. By staying organized and informed about tax laws and regulations throughout the year, you can maximize your tax savings and avoid common tax mistakes.
Ensure that you avoid tax-savings mistakes and give a best shot to use tax deductions. By taking informed decisions and making wise investments, you can earn savings and reduce the tax liability.