KNOWLEDGE CENTRE Tax Planning / When is the Right Time to Start Tax Planning?
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When is the Right Time to Start Tax Planning?


The very definition of planning is to prepare thoroughly to achieve a future goal or accomplishment. Thus, the right time to start tax planning is now. However, it is commonplace to start tax planning in March. As tax planning is considered to be only about reducing the amount of taxes to be paid and not the savings you can do therein.

The investments made with the purpose of saving taxes enable you to achieve your financial goals. Furthermore, they increase your savings amount by reducing your tax payout and help you to invest more for a secure financial future. Starting early on your planning for your tax commitments allows you to do thorough research on the various investment instruments available in the market and find the optimum way on how to save income tax.

Why Starting Early Is The Best Option To Save Tax?

As with all investment instruments, to earn the best returns, you must stay invested the longest you can. If you are exceptionally good at timing the stock market, then it is a different story. Unfortunately, even seasoned professionals are unable to time the market. Furthermore, it has been observed that staying invested for more time in the market is always better than timing the market.

Let us understand some of the common problems faced when you delay tax planning strategies.

  1. Waiting for the 11th hour to make tax-saving investments results in making ill-informed decisions or inaccurate calls leading to incorrect investments and increasing the risk of being locked-in for a long period in a wrong investment.
  2. Ill-informed investments not only reduce your earnings but could also result in heavy capital losses.
  3. Discontinuing or redeeming your investments because of poor performance could attract penalties or charges, further increasing your loss.
  4. The 11th-hour investment means having to pay a lump sum at the end when you could have distributed your investment in smaller monthly installments.
  5. Investing in the 12th month is a loss of 11 months of interest earnings through the power of compounding.

You may have found a way on how to save income tax; however, the delay may result in other types of severe outcomes.

How to make your tax saving investment strategies?

Tax planning is a meticulous process and should be planned and carried out diligently. Here are three steps to make an effective and efficient strategy to choose the best tax-saving options.

  1. Calculate your tax liability
    Based on your income and the amount of deduction you can claim thereof, start your investments and advance tax payments from the first month. This allows you to break down both into smaller manageable installments.
  2. Consider an insurance plan
    Consider buying a term life insurance plan, wherein the premium is eligible for tax benefits and provides higher coverage for a lower premium amount.
  3. Choose health coverage
    It is crucial to ensure you have sufficient health insurance coverage to take care of your physical and financial health during a medical emergency. An unexpected illness or hospitalization may create havoc to your financial stability and erode your savings. On the other hand, you can start investing in a contingency fund to protect yourself against such situations.

Important factors to consider when choosing the best tax-saving options include:

  • Lock-in period
  • Risk profile
  • Financial objectives
  • Personal tax bracket
  • Tax liability
  • Inflation rate

Equity-Linked Savings Schemes (ELSS) is a diversified equity tax-saving mutual fund that offers capital growth. The investment amount is eligible for tax exemptions under section 80C of the Income Tax Act. Moreover, returns earned on redemption after the three-year lock-in period are also exempted from tax.

ELSS funds, in comparison with other tax-saving investment avenues such as National Savings Certificate (NSC), Public Provident Funds (PPF), and other investment options have a lower lock-in period and better earnings potential.

Like with all mutual fund investments, investing in ELSS also requires thorough research about the fund manager, the equities invested in, and their past performance.

The ARQ investment engine, a proprietary tool in the Angel Bee app greatly simplifies this process for you. Using this tool, you may invest and track the performance of your investments from virtually anywhere, provided you have access to the Internet.

The ARQ investment engine is free of all human bias and provides recommendations based on evaluations run by the advanced algorithms and quants. Thus, enabling you to carry out better planning and invest in the best tax-saving mutual funds and other investment options.

Start your tax planning as early as you can, use the right investment analyzing tools such as the ARQ and stay invested for long to efficiently create greater wealth for your retirement and other financial goals.

Download the Angel Bee app today and receive customized recommendations through the technology-driven ARQ tool on your smartphone.


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