You will agree that it has been a chaotic year for everyone…
People have lost jobs, had to undergo pay cuts, had to relocate to smaller cities & whatnot…
In all this, it’s entirely understandable and human to go slightly off-track on tax matters, isn’t it?
But…one fine day, as you open your work inbox, you receive the dreaded e-mail from your HR reminding you to submit tax proofs by so & so date…
Now, back of your mind, you know this so well…
If you don’t submit the tax proofs, your take-home for the remaining months of the year will be less, due to the effect of TDS
You might be wondering what to do in this situation?
Sit back and relax while we share some super practical action points with you…
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Action Point #1: Acknowledge the problem & review your tax situation
As with most life problems, acknowledging that the problem exists is the first & most challenging step…
So, spare some dedicated time from your busy schedule to review your tax position…
First, check your income & tax liability for the year (you might need some MS excel or online calculators to do this)
If there is no tax liability for you, you need not worry & can even skip reading this article altogether.. have a blessed day
However, if there IS a tax liability, keep reading further…
Action Point #2: Check your existing expenses/investments that qualify for a tax deduction
Thankfully, tax planning doesn’t always mean making fresh investments
Especially when the year has been so financially hard for all of us, isn’t it?
Examples of some regular payments that qualify for tax deduction are as follows:
- Children’s tuition fees
- Life & Medical Insurance premiums
- Your share of PF contribution to your employer’s PF fund
- House-Rent/ Home loan EMI payments
In all likelihood, you might have already made some or all of these payments…
If yes, consider these investments in your tax calculation & recalculate the tax liability…
If there IS still a net tax payable, you may have to make some qualifying investments. Let us show you how…
Action Point #3: Carefully explore avenues where you can invest now
Speaking of investments that qualify for the tax deduction, there are options galore to confuse you enough…
And know this…
Not every random tax-saving product is RIGHT for you
So DO NOT make a hurried investment commitment just for tax-saving sake…
Remember, for an investment to really work for you, it must be aligned to your financial goals and risk tolerance…
So, decide on these main points before investing:
- How long you can invest (time horizon)
- How much risk you can tolerate (risk tolerance)
- This investment is towards which financial goal (like buying a home or child’s education)
- What is the taxation structure of the investment?
For example:
- If you are saving for the long term & can digest the day-to-day market volatility, ELSS funds may be the right choice for you.
- If you are a low-risk investor & are content with low returns, you can consider PPF or tax-saving FDs.
Once you make the investments, provide the investment proofs to HR and ask them to consider them in your tax calculation.
Also, don’t forget to check the revised tax statement received from your employer. This will help you detect any investments not considered by your employer & help avoid any confusion later on…
Some more tips for you:
- Employers often re-open the proof submission window in February and March. So, if you make tax investments after the submission deadline, you can still reach out to your HR to see if they can consider those investments in the tax calculation
- If your investment were not considered by HR, you can still claim the tax refund by declaring those investments in your tax return
- You don’t need to submit proof to tax authorities when filing your tax return. However, it is good to keep a record of receipts just if sought in the tax assessment.
