For a smooth tax filing process, all your tax-related documents ought to be kept securely.
Most individuals begin tax planning when the due date for filing income tax return is around the corner. However, it is prudent to start your tax planning earlier as it gives you more time to make a good estimate of your income and gains.
One easy way to calculate your tax liability is to print the previous year’s return and write your estimate of current year’s numbers. This can be a ballpark estimate, and once you write the new numbers, you can use them to estimate your taxable income and then determine what tax bracket your income falls into.
For instance, if your last year’s taxable income was `7 lakh and you are estimating 15% growth in your net income this year, then your taxable income will also increase in similar proportion. Calculating your tax liability early in the financial year will enable you to know how much you need to invest to save tax.
Plan your investments
To reduce your tax liability, you can take advantage of various tax deductions and exemptions. For instance, if your taxable income is expected to be `8 lakh at the end of the financial year, then you can start investing in tax-saving investments.
From a tax planning standpoint, there are several…