What is Tax Planning?
As you know, in this world, nothing is certain except death and taxes. As a good citizen, you have to abide by the tax laws of the land. As a hard-working person, it is not how much income you earn that matters, but what you get after taxes. Income taxes, if not planned well, can take away a major portion of your income. Similarly, as an investor, you must understand the difference between pre-tax returns and post-tax returns. Most of the times, you are lured by higher returns on an investment but you do not realize the impact of capital gains tax on profit from it and income tax on any dividend or interest income from it.
You may already be buying insurance or investing in instruments with the sole objective of saving taxes. Tax Planning is more than that. It is about minimizing taxes through tax-saving instruments and also making sure that those instruments are suitable to meet your financial goals. In fact, meeting goals becomes primary objective and saving taxes becomes secondary objective.
Tax Planning is in fact a part of Financial Planning. It is a process, not a product. This process involves (a) collect the data about your income from all sources (b) analyze the data for taxable and tax-exempt incomes (c) account for existing tax saving instruments towards deductions and rebates (d) calculate the possible amount to invest in tax-saving instruments and assign them to financial goals.
The outcome of Tax Planning process is a ‘Tax Plan’ document. This document spells out the details on tax saving instruments you must buy to comply with your taxes. If you follow it, you are availing all the tax incentives provided by the government to meet your financial goals.
Why should you have a Tax Plan?
Tax Plan makes sure that you are not overpaying to the government in taxes. A few but not all benefits are:
What Tax Planning is not?
Here are few things that Tax Planning is not:
How can we help you?
We are Certified Financial Planners by qualification and Mutual Fund Distributors by profession. We provide ‘Tax Planning’ service to individuals and families. However, we provide this service only as incidental to distribution of Mutual Funds as taxation is holistic to personal finances including MF Investments.