5 Tax Saving Mistakes To Avoid

Navigating the complexities of tax-saving strategies requires diligence and awareness of available deductions and exemptions. Making informed decisions can significantly reduce tax liabilities and optimise financial planning. By being aware of these pitfalls, you can ensure you claim all the deductions and benefits you’re entitled to, saving you valuable rupees come tax season.

Taxpayers have access to various provisions under the Income Tax Act, such as Section 80C, which offers deductions for investments in avenues like PPF, ELSS, NSC, and EPF.

However, overlooking these avenues or failing to understand their nuances can lead to missed opportunities and higher tax burdens. Therefore, taxpayers need to be well-informed and proactive in leveraging these tax-saving opportunities to their advantage.

Here are 5 common mistakes to avoid that can significantly impact your tax-saving strategy;

1. Being Unaware Of Deductions: Ignoring sections like 80C of the Income Tax Act, which offers several avenues for tax-saving investments such as Public Provident Fund (PPF), Equity Linked Saving Schemes (ELSS), National Savings Certificate (NSC), and Employee Provident Fund (EPF). Failing to take advantage of these deductions up to the maximum allowable limit (currently Rs 1.5 lakh per annum) means missing out on significant tax savings.
2. Not Utilising House Rent Allowance (HRA) Exemption: If you are a salaried individual receiving HRA as part of your salary, you can claim an exemption on the rent paid, subject to certain conditions. Failing to submit rent receipts or provide proper documentation to your employer can result in missing out on this valuable tax-saving opportunity.
3. Neglecting Health Insurance Premiums: Premiums paid towards health insurance policies for self, spouse, children, and parents are eligible for deduction under Section 80D. Not availing this deduction can result in higher tax liabilities. Additionally, senior citizens are eligible for higher deductions under this section.
4. Not Utilising NPS (National Pension System) Benefits: Contributions made to NPS are eligible for tax deduction under Section 80CCD(1B), over and above the limit available under Section 80C. Not availing of this additional deduction can result in missing out on tax savings and a valuable retirement planning opportunity.
5. Last-Minute Tax Planning: Procrastination is costly! Don’t wait till March to invest for tax savings. Early planning allows you to spread investments throughout the year and potentially earn more tax-free interest.