Why should you Plan your Tax Savings in Advance?

  • Posted By : reliancesmartmoney.com
  • Wednesday Oct 31, 2018

While planning your taxes, you might have obviously focused on reducing your tax deductions.  However, did you also focus on increasing your returns? Tax planning is not just about tax saving; tax planning has a broader picture where you can benefit by advance tax planning in the long-run. Taxes can be planned any time before the tax return filing deadline. However, here are a few good reasons for planning your taxes in advance:

  • Can adjust funds 

If you plan your tax savings towards the end of the year you might just fall short of funds for investing. Thus, by planning your investments in advance, you can save from your monthly salary. In fact, tax saving schemes like the Equity Linked Savings Scheme (ELSS) allow you to invest every month.

  • Plan your taxes and investments at once 

You might have heard about a variety of tax saving schemes like the Public Provident Fund (PPF), the National Savings Certificate (NSC), Fixed Deposits (FDs) and ELSS. The tax saving amount will be the same for all these schemes (Rs. 1.5 Lakh according to Section 80C), but returns will be different for them. 

ELSS (a type of mutual fund investment where more than 80% of your funds are invested in equities) provides you returns better than all the other schemes, but, you need to choose the right investment basket. An early tax planning gives you ample time to choose an appropriate investment option for yourself.

  • Can use tools 

Early planning gives you ample time to compare your investments with tax saver tools available online. Tools like RoboAssist help you choose the right investment basket in case of ELSS investments. The tool can guide you to the right investment option that suits your goals, help you save taxes and plan your goals at the same time. All you need to do is plan your taxes early, to get the best from these tools.

  • Power of compounding 

The earlier you start the better compounding works for you. All tax saving schemes have a lock-in period. The earlier you begin, sooner the lock-in period will provide you with compounded returns.

  • Faster refunds 

Planning your tax savings early will enable you to file your returns on time. This, in turn, will help ensure your refunds are processed quickly.

Planning your taxes way in advance gives you a chance to explore and compare various tax saver options. Tax planning should not be an activity to be done at the end of the financial year, but a round-the-year exercise. By planning your taxes early, you can convert your tax saving scheme into a high return investment. Start your tax planning  now to get better returns and avoid hassles of last minute submissions with reliancesmartmoney.com

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