GURUSPEAK Tax plan not just for filing returns

 Proper tax planning today forms an unavoidable step in the annual tax filing exercise for those who have taxable income. With the challenge of managing financial goals and expenses on one hand and growing aspirations & rising inflation on other, proper tax planning can be effectively used to play a critical balancing act. However most of us fail to give tax planning the importance it deserves. 

    The common man usually wakes up to the urgency of tax planning at financial year end. This practice is fraught with risks where one usually ends up making less than appropriate choices. The aggressive sales practices by advisors & financial institutions also encourages this undesirable approach. Tax planning must not be treated as the last step before preparation of returns but something that should be taken before start of every financial year. It is an important part 

of your overall financial planning as it not only helps reduce the tax liability but also supports your other financial goals. The right approach to tax planning can be briefly summarised in the following steps. tAt the start of the financial year, undertake an assessment of your financial goals & resources. This will give clarity on the amount of investments required with time horizon and also on insurance needs. Preparation of a proper financial plan is highly recommended. tThe next step is planning your expenses like rent, tuition fees, care / treatment of handicapped persons, parents, home loan EMIs, charity, etc. tNext estimate how much of tax saving avenues are utilised given all the expenses, deductions already planned. 

tLastly estimate the possible taxable income considering the exemptions,deductions already enjoyed. Only if there is a taxable income remaining, is there any need for further tax planning. Tax liability can then be planned by deciding upon any new expenses or investments or insurance to be undertaken in line with your financial plan / objectives. The execution of same can be properly planned or spread throughout the year as per your comfort. 

    The above process can be real fun and easy to follow once you begin. It would ensure that our financial goals are on track and tax liability is reduced by judicious use of avenues only to the extent they are required. Know that tax planning is not the isolated exercise here but it is something that supports your overall financial plans. The key is to start the process at the start of financial year and see the benefits for yourself ! 

    The writer is co-founder, 

    NJ India Invest