Tax planning must account for retirement and inheritance

Over 65% of tax-payers across the country scurry with their last minute tax related investments in the final four months of the year. While, obviously, early tax planning can help you avoid the rush of filing right before the due date, it can also provide a variety of other benefits.

Efficient tax planning simply means to start the year knowing what will be tax deductible, identifying what income will be taxable and determining what moves you can make to get the best tax advantages throughout the year.

Early tax planning helps

To file right: Early tax planning avoids last-minute rush that can lead to computational errors or overlooked deductions and credits, especially if you do your own taxes at the last minute.

In avoiding penalties: You can avoid late penalty, as well as an interest charge through early tax planning and attention to deadlines.

In taking advantage of deductions and credits: Early planning lets you identify tax credits and deductions that you can take advantage of now, but won't have access to in the future.
In long-term tax planning:

Changes in your financial life, such as retirement or inheritance, have major tax implications that you can account for if you plan ahead. Estate planning and retirement planning can ensure that you don't lose more of your savings or estate to taxes than you need to.

In SIP your way to tax planning: Knowing your tax liability can efficiently help you participate in instruments like ELSS, RGESS, Ulips and PPF, spread over the entire 12 months, rather than struggle for funds in the last 3-4 months. For one it helps your cash balances, and at the same time it also gives fantastic rupee cost averaging opportunity.

In planning your losses: You should make the effort to know more about the rules to set-off your short-term and long term capital losses and you would be pleasantly surprised how losses can save you on taxes.

In planning your loans: Plan when you can take that plunge into taking a home loan (with new sops thrown in - it just might make sense for new home buyers). Time the loan in such a way that you get the maximum benefit from the interest deductions.

In changing your entity structure: Create the optimal entity structure for your family and yourself through HUF and trusts to maximize your tax benefits and legal asset protection benefits.