As the year draws to a close, looking back at the overall financial report of the year gone plays an important role in effective financial management. The end of the year gives us a perfect time and opportunity to check the financial books to asses tax strategies for the current financial year. Exploring tax saving options at the last minute are a bad idea and the end of the year offers the perfect window of opportunity to evaluate and change taxation strategies as required. Irrespective of whether you are a salaried individual or a business owner or self employed professional, there are some essential financial to do things that must be a part of your overall financial planning routine.
Assess Your Tax Strategies: With the financial year ending closing is, the end of year is the perfect time to assess your tax strategies for the year. Irrespective of whether you are self employed or salaried, tax strategies play an important role in a financial well being. Any major purchases that can potentially give you tax rebate must be done in 2013 itself to counter any unexpected large chunk of taxable profit.
A lot of people commit the cardinal sin of checking their books only a few weeks before the March 31 deadline. By that time it is usually too late to embrace effective tax planning. The last month of the year offers a perfect opportunity to evaluate and assess the taxation strategies to make sure one does run out options in the last minute.
Make a Capital Purchase: Buying a capital purchase before the end of the year can bring multiple benefits especially if you are a business owner and seeking to buy a vehicle. Firstly one may get a cheaper deal as most buyers wait for the New Year to usher in before taking delivery of their vehicles and secondly one show the purchase under capital expenses which can compensate for taxation in the business ownership. Technically one can buy any asset that have a useful life for more than a year including vehicle, electronic equipment or machinery and even furniture to increase your capital expense in the current year.
Make a Charitable Gift or Donation: The year end is one of the best times to contribute to the society by donating for charity or a cause you believe in. Apart from bringing a smile on the faces of the under privileged, all donations and charity can avail you deductions up to 50 to 100 % under Section 80G of the income tax act. While deduction for donations made cannot exceed 10 per cent of gross total income, it makes more sense to donate when the charitable organizations appreciate the gesture rather than to donate just before the end of the financial year only to save some tax.
Explore Other Tax Saving Instruments: The end of the year is the best time to evaluate your personal finance goals for the New Year as well as commit tax planning for the current financial year. There are a number of tax saving options that can be useful in saving tax. The earlier one commits to tax planning, the better the chances of effective tax management. A lot of people end up paying a hefty tax only due to poor tax planning. Explore tax saving instruments like Provident funds, National Savings Certificates and Senior Citizens Savings Scheme and other schemes like Section 80D for payment of health insurance premium. The sooner one starts to plan; the better it is for the overall financial well being.
Get Your Financial Books in Order: Do not wait for the last week of March to get your financial books in order. The end of the year is the best time to get all your financial books updated to avoid the last minute jitters before the end of the financial year. It is useful to update all your bank account statements and any Tax Deducted at Source (TDS) certificates and compile them in your financial folder updated till December. If you have made a donation to any charitable organization make sure that you collect a valid receipt to claim deduction u/s 80G. Compute your tax for the year and assess your profit and expenditure till December to give you a better insight into the future tax planning that an be useful in saving tax for the current financial year before the March 31 deadline.