Sometimes in our lives the chasm between precept and practice can get glaringly large. Though we are already half way through the current financial year, this writer has not yet got around to starting his yearly tax-planning exercise. In all likelihood, a number of those reading this piece would also be guilty of this omission.

Two points ought to be remembered when undertaking tax planning. One, it should not be left for March or even for the last quarter of the year when the tax cuts begin. If you have not submitted proof of investment by the third quarter of the financial year and money gets deducted from your salary, it can take a lot of time for it to be refunded even if you do invest later. Begin making tax-related investments right at the start of the financial year. Sometimes, if you invest for tax-saving at the last moment, you could be sold products that are not suited for your long-term financial health.

Two, tax planning should not be undertaken in isolation. Such investments must dovetail with your long-term financial planning strategy. As Mumbai-based certified financial planner (CFP) Gaurav Mashruwala says: “The Indian tax system provides tax benefits on many saving instruments. An individual should focus more on his financial goals than on availing tax benefits from those investments.”

Instruments available and criteria

Most of us have heard of tax-saving instruments available under Section 80C that help taxpayers bring down their net taxable income by Rs 1 lakh. If you haven’t, do look at the table given below that also provides the investment limit for each product.

... contd.