Beginner's Guide to Tax Planning

1. Beginner’s guide to tax planning

2. Introduction Tax planning is an art that every hard-working individual must master. Who would want their hard-earned money to be held at the mercy of tax deductions? It is mandatory for everyone who falls under the income tax bracket to pay tax, but there are a number of tax-saving schemes like ELSS available in the market which taxpayers can benefit from. But to save taxes, first, you need to understand how to plan taxes. An individual who masters the art of tax planning can do their financial planning with ease. Tax planning is nothing but toning down the tax liability through tax exemptions, claiming tax benefits and tax deductions. Taxpayers in India have a plethora of tax-saving schemes to choose from which offer tax benefits, exemptions, and deductions in order to cut down tax liability. Investing smartly and making optimum use of available resources is a great way to save taxes.

3. Primary objective As mentioned earlier, tax planning is an integral part of financial planning. All the elements of a financial plan can only be effective when an individual can efficiently plan their taxes. Opting for tax saving schemes leads to channelization of a tax payer’s annual income and reduces their tax liability. The primary objective of tax planning is to gain economic stability by minimizing tax liability.

4. Types of tax planning Depending on which tax slab your income falls under, an individual has to pay his/her tax mandatorily. However, there are various tax-saving instruments which can help an individual from reducing their overall taxable income and in some cases, completely receive tax exemption. Here are some of the categories under which tax planning can be vastly categorized: 1.Purposive Tax Planning: Planning to save taxes keeping in mind a specific objective 2.Permissive tax planning: Tax planning done under the structure set forth by the law 3.Long-range and Short-range tax planning: Tax planning done at the beginning and end of a financial year respectively

5. conclusion • Investors looking for saving taxes and wanting to grow wealth over a long time period can consider investing in ELSS. Equity Linked Saving Scheme or ELSS, is a tax saving mutual fund investment scheme that comes under Section 80C of the Indian Income Tax Act of 1961. Investors can invest up to 1.5 lakh annually and claim tax deductions by investing in ELSS. ELSS also comes with one of the shortest lock-in period of three years as compared to other tax-saving instruments. If you want to save taxes and potentially grow wealth through equity investment, you can consider investing in ELSS.

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