To maximize tax savings and avoid potential pitfalls, taxpayers should be mindful of common mistakes when planning their finances. Understanding tax exemptions and deductions is crucial, as decisions made hastily can lead to missed opportunities for savings.
Under Section 80C of the Income Tax Act, taxpayers can save up to Rs 1.5 lakh annually by investing in instruments like PPF, ELSS, NSC, and EPF. Failure to leverage these investment options may result in paying more taxes than necessary.
Additionally, individuals should not overlook benefits such as House Rent Allowance (HRA), which allows for exemption on rent paid, or deductions for health insurance premiums under Section 80D.
Contributions to the National Pension System (NPS) are also eligible for tax deduction under Section 80CCD (1B), offering an additional avenue for savings.
Lastly, avoiding last-minute tax planning is key. Investing in tax-saving schemes early ensures not only tax benefits but also opportunities to earn tax-free interest.
By avoiding these five common mistakes, taxpayers can optimize their tax planning and minimize their tax liabilities effectively.
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