Tax Planning: How can you do comprehensive financial planning? Here are 5 steps
March is here. You must have already received a couple of emails/notifications from the HR/Finance Team to submit investment proofs to avoid the TDS deduction from your salary. It is that time of the financial year when a lot of people start looking for tax-saving options as it is the last opportunity to save tax. They make last-minute investments in a hurry with the only purpose of saving tax. It is not the best thing to do tax planning in isolation.
Tax planning is important, but it should always be a part of your comprehensive financial planning. Let us see how you can do comprehensive financial planning step-by-step. We will also see how you can choose tax-efficient financial products and save tax at every step in your financial planning journey.
The first step towards financial planning is building and maintaining an emergency fund to tide over unexpected financial circumstances. These can include a medical emergency, job loss, a delay in salary, a salary cut, etc. The emergency fund should contain 3 to 6 months of expenses, depending on your circumstances.
Saving tax on interest earned: You can keep the emergency fund money in a bank savings account. The interest earned on a savings account is taxable. However, you can get a deduction from taxable income on the interest earned from a savings account under Section 80TTA. The maximum deduction allowed in a financial year is the interest earned or Rs. 10,000, whichever is lower.
Interest earned from savings accounts maintained with banks and post offices is eligible for deduction. If you are a senior citizen, you can avail of deduction under Section 80TTB.
It is important for all family bread earners to take life insurance as it is a financial backup for the family in
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