Most Common Tax Saving Mistakes
Quite often individuals may unknowingly make some mistakes while planning to save their taxes. Following are five common tax saving mistakes and tips to rectify them.
1. Waiting for the last moment
You may make the error of waiting until the last quarter of the financial year to plan their taxes. Doing so may cause you to make investments in financial instruments that are not suited to your needs. Instead, you may begin planning at the start of the financial year. This helps you to reap the maximum benefit of your tax-saving instruments.
2. Investing in tax-inefficient instruments
There are numerous investment vehicles available in the market. However, not all financial instruments help you save tax. Though five-year fixed deposits and National Saving Certificates (NSCs) are common tax-saving investments, the interest earned on them is taxable. Instead, you may opt to invest in schemes such as Public Provident Fund (PPF). Not only are such investments eligible for tax deductions but also the interest earned on them is tax-free.
3. Not reaping the full benefits of Section 80C
Section 80C of the Income Tax Act, 1961 allows a maximum tax benefit of INR 1.5 lakh, which may be claimed from your taxable income. However, many are not aware of this fact and often end up paying higher taxes as they are unable to reap the maximum benefits of this limit. You may, therefore, make investments that are eligible for Section 80C deductions, such as Equity-Linked Savings Scheme (ELSS), Employee Provident Fund, National Pension System (NPS), Unit-Linked Insurance Plans (ULIPs), and Senior Citizens Savings Scheme, among others.
4. Not taking basic expenses into consideration
Numerous basic expenses such as children's tuition fees, mobile or telephone bills used for office duties, uniform purchased for office wear, children's hostel expenses, and office conveyance expenses are some allowances that are eligible for tax deductions. Many individuals are unaware of the tax benefits on these allowances and do not claim deductions for the same. It is, therefore, necessary to be aware of such allowances in order to save tax.
5. Failing to set investment goals
Many fail to set investment goals, thereby putting their hard-earned money in financial instruments that are not aligned to their needs. You may plan your tax-saving portfolio in such a manner that you align it with your investment goals, such as child's further education or for your retirement. This will not only help you save taxes but also enable you to meet your long-term objectives rather easily.
You may keep the aforementioned tax saving mistakes in mind while planning your taxes. This will help you make maximum utilization of the various income tax deductions, thereby lowering your tax liability to a great extent.
Term Plan Articles
Investment Articles
Savings Articles
Life Insurance Articles
Tax Articles
Retirement Articles
ULIP Articles
Subscribe to get the latest articles directly in your inbox
Health Plans Articles
Child Plans Articles
Popular Calculators
Here's all you should know about life insurance.
We help you to make informed insurance decisions for a lifetime.
HDFC Life
Reviewed by Life Insurance Experts
HDFC LIFE IS A TRUSTED LIFE INSURANCE PARTNER
We at HDFC Life are committed to offer innovative products and services that enable individuals live a ‘Life of Pride’. For over two decades we have been providing life insurance plans - protection, pension, savings, investment, annuity and health.
Popular Searches
- Term Insurance Calculator
- Investment Plans
- Investment Calculator
- Investment for Beginners
- Best Short Term Investments
- Best Long Term Investments
- 5 year Investment Plan
- savings plan
- ulip plan
- retirement plans
- health plans
- child insurance plans
- group insurance plans
- income tax calculator
- bmi calculator
- compound interest calculator
- income tax slab
- Income Tax Return
- what is term insurance
- Ulip vs SIP
- tax planning for salaried employees
- HRA Calculator
- Annuity From NPS
- Retirement Calculator
- Pension Calculator
- nps vs ppf
- short term investment plans
- safest investment options
- one time investment plans
- types of investments
- best investment options
- best investment options in India
- Term Insurance for Housewife
- Money Back Policy
- 1 Crore Term Insurance
- life Insurance policy
- NPS Calculator
- Savings Calculator
- life Insurance
- Gratuity Calculator
- Zero Cost Term Insurance
- critical illness insurance
- itc claim
- deductions under 80C
- section 80d
- Whole Life Insurance
- benefits of term insurance
- types of life insurance
- types of term insurance
- Benefits of Life Insurance
- Endowment Policy
- Term Insurance for NRI
- Term Insurance for Women
- Term Insurance for Self Employed
- Benefits of Health Insurance
- Health Insurance for Senior Citizens
- Health Insurance for NRI
- Best Term Insurance Plan for 1 Crore
- personal accident insurance
- Annuity Calculator