Common Tax Saving & Filing Mistakes That Everyone Makes
We recently discussed the new Income Tax portal and the plethora of features it comes with. In this article, the team at Incomet elaborates on a few Income Tax filing/saving mistakes that are simply too common to be ignored!
Mistake Number 1: Not Planning Tax Saving in Advance
Many people think of tax saving only when the financial year is about to come to a close i.e., in March. Thinking of tax saving in March is like preparing for your exams 1 day before the exam day! When it comes to tax saving, the sooner you begin the better your plans can be executed.
To validate this notion, let us take the PPF account for example, in case you invest money in your PPF account in the first month of the financial year (April) then you will receive a lot of tax-free interest for the year, hence the idea of investing into the PPF account in April or the first month of the financial year is a lot better than investing to the PPF account in March or the last month of the financial year!
Mistake Number 2: Thinking that Tax Saving is Just Investing!
In case you’ve always thought of tax saving as investing, then think again. Investing is only a part of the entire tax saving measures that you can use each year. The other part can be how you manage your spending, Income tax laws always allow for several deductions from your taxable income each year. Knowing these deductions and correctly reporting them can save a lot of tax for you each year. People often miss out on reporting the expenses like health insurance premium, repayment of home loans, etc., which all fall under the bracket of expenses that might be deducted (Depending on your ITR form type)
Mistake Number 3: Not Having a Diverse Tax Saving Portfolio
Tax saving measures often come with lock-in requirements. Due to this, they do not align with the short-term financial goals that you might be having. Hence it is always beneficial to have a diverse tax saving portfolio.
Mistake Number 4: Not Reporting All Sources of Income
People often forget to include the interest they’ve earned through money deposited in banks or even Fix Deposits in their Income tax returns. This income is taxable as per your individual tax slab. Always be sure to include all these “easy to miss” sources of income in your income tax returns.
Mistake Number 5: Not Checking the Form or Picking the Wrong Form Entirely!
Always check the filled forms extensively. Even if your CA or tax consultant has filled the form for you, be sure to still check all the details being reported as it is always needed to ensure the accuracy of the information. Some people might be picking a form that is not the ideal one for them as well. Be sure to cross-check this information online too!
Tax planning and tax saving measures are no different than the regular investment methods you adopt, including the Income SEP! So always be on the lookout to learn new measures that might have not existed before and treat the tax filing and tax saving process as seriously as you take the investment side of things! That’s it for this blog from team Incomet, see you in the next article!