Planning tax does not always have to be overwhelming. Like you, I too was once a beginner who was struggling with tax planning and filing. I made silly mistakes like exploring only section 80C, making wrong investments at the last minute and not structuring my salary well.
Shared below are a few of my interesting confessions. You too can now act like a genius. Why make your own miscalculations? Learn wisely from common mistakes that someone who’s now an expert had been making over the years. Check out the simple hacks given below for smarter tax savings like never before.
Confession 1: I could have saved close to 80k by restructuring my salary.
Yes, I was pretty overwhelmed by my promotion even more because it was overdue. But, sadly I completely missed out on the most important changes that I should have made to my salary components. A small change can save a big chunk of tax. This is how I could have restructured my salary slip.
Confession 2: I should have declared my birthday present as well.
You are free to mock me for being ignorant about not declaring other sources of income apart from my salary. But the fact is I did not know that I should declare my passive income as well. I had to redo my tax returns to accommodate:
- The interest of around 70k from my fixed deposits in different banks
- A bank transfer of 50k presented by my in-laws on my birthday. I had no idea it was taxable and was to be declared
In your case, there might be other sources to be declared as well. The key is to understand elements like the source of income, type of income, the time it was received to figure out how to treat them while filing taxes.
Confession 3 - I followed the herd and explored only section 80C.
Due to lack of awareness and time, while exploring my options, I did not look beyond the popular deductions of 80C. And I regret doing that so much! I could have saved extra moolah if I knew more about these deductions.Confession 4: I bought an endowment policy without checking the details.
I bought an endowment insurance in desperation to save some money during tax season. Did I really need it? No!
The agent selling the policy understood my rush and fooled me into buying a policy that was high on commission for him but didn’t serve my purpose. I ignored the details about the benefits that the policy was offering and signed up for it. The worst thing is that I didn’t pay attention to the fact that these policies are usually 10 to 20 years and after five years of premium payment, we redeem them. Now what? The amount that I’d get as returns would be lower than the principle itself. The policy would provide me a lot less in terms of value as against the exemption I received.
What I could have done better here was exploring other options that synced with my investment goals and horizon rather than just going for an investment for the heck of saving taxes.
Confession 5: I should have planned taxes at the start of the year.
Another mistake that I made was investing in a rush. You can call it an extension of my last mistake. While I picked the wrong investment option as I was greedy to save on taxes, I parked my money at the wrong time as well.
I am not sure if I should be happier that I was amongst the 80% that start only at the end of the year or guilty about missing on the following:
- I didn’t have enough time to compare various products in the market
- I settled for the one that seemed safest and was popular on the internet. Sadly, it did not suit my needs
- I lost on the cost averaging benefit
- I parked a lumpsum amount in equities without timing the market. And sadly I lost a big amount of money here again
- A better way would have been spreading it out on a monthly basis via SIP
- Not only did I lose money, I had to take a loan from my brother to invest as I was burdened with other expenses during this time
Thankfully, I’ve learned from my mistakes. I’m glad that I’ve figured out where exactly I was going wrong. So, that I could plan my taxes better and wisely in the future. Guess what’s the very next step that I took?
I enrolled myself online for smarter tax planning, filing, saving and investing with an online platform called tax-max. Now, I can organize my personal finances with precision. tax-max helps me in planning taxes to enjoy tax advantages under sections 80D, 80CCD (NPS), LTA, HRA, etc.
Hopefully, you will learn from my mistakes…and plan your taxes well in advance.