There is a common saying that “There is nothing which hurts more than payment of taxes” we always run behind saving tax but forget to plan it. Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to plan one’s finances in the most optimized manner. Tax planning allows a taxpayer to make the best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a financial year.
Financial planning is the art of implementing strategies that help you reach your financial goals, be they short-term or long-term. That sounds pretty simple. However, if the actual execution was simple, there would be a lot more rich folks.Tax planning and financial planning are closely linked because taxes are one of the large expense items as you go through life. If you become really successful, taxes will probably be your single biggest expense over the long period. So planning to reduce taxes is a critically important part of the overall financial planning process.Unfortunately, a lot of people fail to understand the importance of tax planning until they make a huge mistake and it costs them to pay unavoidable taxes. The trick is to plan ahead so you don’t learn this lesson the hard way.The taxpayer has to pay less tax by using tax planning because he is using all available exemptions, deductions reliefs and rebates. All is done within the boundaries of the law.Consult your financial planner at an earliest and discuss following tools which help in proper tax planning and avail maximum benefits.
- Timing of income, purchases and expenditures
- Selection of investments and maturity time of investments
- Filing status
- Claiming deductions
- Details of exempted income