Tax saving is something most taxpayers want to do. But amidst the fear of investing in financial instruments and the lack of knowledge of tax savings provisions, people end up paying hefty taxes every year. With the year coming to an end, investing wisely can be a good way to start another year. Let’s look at why the month of January is an important month for tax-savings and some advantages of early investments:
Importance of January Month for Saving Tax
January is the first month of the year and consists of a new beginning with more transactions and investments. With the taxation system of India being the backbone of the economy, January plays a vital role in a taxpayer’s life. The New Year starts with resolutions of spending wisely and saving more along with investing in tax-saving financial instruments. With just three months till the date of filing the Income Tax Returns (ITR), taxpayers are consolidating the bills and receipts and are finding better options to save on taxes. Let’s look at the advantages of early investments after the New Year begins:
Advantages of Early Investments
Even if one has spent the year without investing in any instruments that can avail them of tax benefits, it is not too late to begin today. Here are some benefits of investing early in the year before filing the Income Tax Returns:
1. Huge Variety of Options
There are numerous investment options due to which one can end up saving on taxes and decrease their taxable income. If a long-term investment plan isn’t suitable, a short term investment option can be chosen. These options not only help in saving taxes but also help in wealth creation. The financial instruments can also be selected based on a taxpayer’s risk appetite and the kind of returns they are expecting. Given below are a few eligible investment options for saving tax in January:
- Public Provident Fund (PPF)
- Life Insurance - Term insurance, Unit-Linked Insurance Plan (ULIP), Endowment Plan, Money-back policy, etc.
- Fixed Deposit
- Equity-Linked Savings Scheme (ELSS)
- National Pension Scheme (NPS)
- Employee Provident Fund (EPF)
2. Tax Savings Provisions: Section 80C& 10D
Under Section 80C and 10D, a taxpayer can claim income tax deductions for eligible investment options. These provisions enable tax-saving and encourage one to opt for the investments that are eligible under them. Early investments aid in figuring out the exact amount one has to claim.
3. Filing Income Tax Returns
It is always advised to file the ITR before the deadline as a last-minute filing can result in mistakes. Taxpayers should also have the relevant documents ready to make the entire process smoother without any errors.
