Income Tax Return (ITR) filing: Avoid last minute rush! Know how ELSS, PPF, insurance help you save taxes smartly
Although the Income Tax Department generally gives a scheduled time for filing ITR once a year, yet there is always last minute rush witnessed among taxpayers.
Income Tax Return (ITR) filing: Alongside paying taxes on income and other sources, a citizen is can avail some tax benefits that reduce his payment burden to taxman. These benefits are received and officially acknowledged in the form of Income Tax Return (ITR) filing. Although the Income Tax Department generally gives a scheduled time for filing ITR once a year, yet there is always a last minute rush witnessed among taxpayers.There are many reasons for this rush at the last moment. While some try to still get cracking and follow proper procedures for filing ITR, either online or taking help of Chartered Accountants (CAs), some simply get frustrated by the fact that it requires them to recall and keep track of what they spent their money on or saved. Thus, this may result in laziness and in the process ITR does not get filed - some even forget it for years!
Archit Gupta, Founder & CEO ClearTax says, " In the last few months of the financial year, investors get busy in making tax-saving investments. And one may notice most of the investment mistakes happen at this time of the year. Financial planners usually advise adopting a systematic approach to investing throughout the year"
However, Gupta also adds, "investment havens like ELSS funds experience a majority of inflows at the end of the season. Traditional life insurance plans which are seldom in demand, become the go-to product at this time."
Even though such a behaviour is prevalent, instead of adopting a haphazard manner one must approach tax-saving smartly. Here's how as per CleartTax.
Steps to follow for saving taxes smartly
You may have been busy all this while to think about saving taxes. However, it is always better to start late than never. Don’t assume that you have missed the bus. In fact, you may follow some of the tips and tricks to avail tax advantage.
Here are a few steps which will help you to avoid the last minute hassle while filing income tax return:
1. Invest in an Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Scheme (ELSS) have become a popular tax-saving haven among the investors. Undoubtedly, ELSS is the most tax-efficient haven amongst the various 80C options available. Especially those who are comfortable with some risk and want high returns must take advantage of ELSS to get an exposure to stock markets.
ELSS provides twin-benefits of tax savings plus wealth creation. Investments in ELSS funds have known to give historical returns of around 12%. So, if you have already contributed say Rs 1lakh in other 80C havens, then you may invest the remaining Rs 50,000 in an ELSS fund of your choice.
2. Deposit some money in your PPF account
You may enjoy tax benefit by making a deposit in your PPF account. As per Sec 80C, contributions up to Rs 1.5lakh are admissible towards claiming a tax deduction. By transferring some amount in PPF, you may utilise this year-end opportunity to make up for the deficiency in your overall deduction limit. Money parked in PPF earns an annual interest of around 8% (subject to quarterly revisions). Check with your bank if it provides an online money transfer to PPF facility. Get your passbook updated later.
3. Align your insurance cover with individual needs
Life insurance plans are yet another product which are highly used by investors to avail tax deductions. But don’t go for a life insurance just for the sake of saving taxes. Remember that the life insurance premium payment obligation remains throughout the policy tenure. You may close the risk cover before maturity but it leads to loss of premiums already paid along with non-accomplishment of goals.
Hence, it becomes very important to choose a plan which suits your risk cover needs fully. Additionally, to get the full benefit, do not combine these mutually exclusive goals i.e. higher returns on investment, risk cover, and tax-saving. Instead of going for costly ULIPs, you may opt for a term insurance plan which provides higher risk coverage at a relatively low premium.
4. Secure your health :
You should secure your health insurance right away. Many companies or aggregators are offering health insurance plans which will not only secure your health but also save your taxes. You can pay and claim a deduction of up to Rs. 25,000 for health insurance of self, spouse and dependent children under section 80D. You will be eligible for an additional deduction for health insurance of your parents to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000 if parents are more than 60 years old.
Also, a deduction of Rs. 5000 is allowed for preventive health checkups to the individuals.
5. Charitable Donations :
Another way to save taxes while doing some good is covered under section 80G. You can donate to specified relief funds and charitable institutions and save your taxes upto 100% or 50%, as the case may be, of the amount contributed. Be careful about the institution or trust you donate money as you can lose the benefit of the donation if the entity is not notified for this purpose by the income tax department. Remember,you can save your taxes by donating for a good cause in any mode of payment except cash.
Finally Gupta says, "Saving taxes can be approached in a smart way. All you need to do is keep a few guidelines in mind."
Hence, if you are among those taxpayers who always decide to make a last minute ITR filing, then remember the above mentioned factors. It is alaways advisable to save smartly on your taxes. After all, you don't want to waste your hard-earned money!