Get ready for the last minute planning
The last few months of the financial year witnesses a rush by individuals to complete their tax planning effort but before they do anything there is a need to take a careful look at their situation.
December 28, 2012 / 01:20 PM IST
By Arnav Pandya
The last few months of the financial year witnesses a rush by individuals to complete their tax planning effort but before they do anything there is a need to take a careful look at their situation. A little bit of homework earlier in the day could prove to be a big relief in terms of a smooth passage in the period ahead. However this is one area that not many people pay much attention to and the consequences arising out of this are also quite severe. Here are some things that an investor can undertake as they work their way towards the end of the tax saving season.
Total the existing investments
One of the biggest mistakes made by individuals is that they go and undertake tax planning without looking at their existing condition. This leads to a situation where there is a waste of the efforts and sometimes even double efforts are undertaken in the same area when this could actually be avoided. The way to begin is to take a close look at all the investments and expenses that have been made till now and then see what will be coming up in the next few months so that the remaining shortfall can be known. One example where a lot of people miss out is that of the Employees Provident Fund (EPF) because the contribution here is not considered for the purpose of checking the total amount of tax savings made. Due to this reason there is a situation where the individual often ends up doing more than what is actually required as tax saving investments. If for example the provident fund check is being undertaken in the month of December then the contributions for the next three months that will be made should also be brought into the calculations.
Missed out items
An additional check that is also required on the part of the individual is whether there are some heads of investments or expenses that have actually been missed out. This is essential because it could be that some of the heads might not be known and that there could be a tax benefit that is available here. A good example of this is the tuition fees that are paid by the individual to the school and which have a deduction under Section 80C. However not many people actually include this in their workings as they have not considered this factor at all. This is the reason why a careful look at the entire situation is necessary to understand if there is any area that has been missed out so that this can also be included.
There is often a lot of problem for the individual right at the end of the financial year as everything has to be done in the last month and there is a shortage of funds available for such activities. In such a position with a few months left for the year end it is better to sit and plan out the expenses that will be made over this time period. This will ensure that the last minute rush is not present and that the planning can also be done effectively. Individuals will be able to better manage the situation without much tension if these efforts are successful. Spreading out of the amounts will also mean that even in the investments there would be a wider choice that is available and this can be effectively utilised so that there is variety that is built into the process. The individual will have to look at options that are suitable for them and then make their choices rather than looking at what others are doing.
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