As Munnabhai famously put it, in his own inimitable manner -- mamu, there's always a first time for everything.
The thought of doing something for the first time could make you either excited or nervous, depending on the task at hand and your natural temperament.
First time tax assessees, for example, are more likely to be nervous than excited.
Each year, the number of assessees in our country increases, as more individuals and entities become liable to pay taxes. Are you one of those individuals who, from this year onwards, will be compelled to shed the regal 'tax-free' tag?
If yes, the following might make for useful reading.
Different persons prepare differently for first-time encounters. Most are possessed by the fear of the unknown. Some get into the planning mode and seek counsel from friends and advisors. A lucky few find that their ignorance is the source of their bliss.
For a tax assessee, it is vital to draw a distinction between tax planning and tax avoidance. Tax planning is your passport to tax nirvana; tax avoidance could easily make your life miserable.
Tax planning is the cornerstone of a healthy tax life. Prepare for your tax life by inculcating the following good tax habits.
1. Get a Permanent Account Number
PAN is a 10 digit alpha-numeric unique code that lends you an identity and is a must for various financial transactions like buying a new house, opening a bank account, opening a demat/ stock broking account.
PAN, in the days to come, will be used as a tracking mechanism for any tax deducted against this number. The effort to convert physical TDS certificates into electronic form is on as well. Once this is done done, your tax payments will become transparent and will be easy to track.
The importance of PAN cannot be overemphasised. For example, you might not get credit for tax deducted by your employer from your salary if you do not have a PAN.
Obtain your PAN either online by visiting https://tin.tin.nsdl.com/pan/index.html or get a tax counsellor to help you to make a physical application.
2. Appoint a tax counsellor
In any chosen game, astute guidance from a coach who has the necessary experience and knowledge can ensure success. The method for successfully managing your taxes is no different.
First, enlist the help of a good, ethical tax practitioner. She/ he would enable you to organise and structure your thought process so that you can manage your taxes efficiently. It is a myth that low-level and middle-level salary earners have no use for tax planners; getting a grip on your finances and related tax aspects early on in life will help you to eventually achieve a more holistic approach to managing your finances.
In order to derive maximum benefit from your personal tax guide, maintain a smooth communication channel. Have complete trust in her/ his counsel.
3. Talk to your payroll department
For salaried individuals, it is definitely a good idea to have a reasonable amount of interaction with your office payroll team. They are the best people to educate you with regard to the amount of tax you are liable to pay. They will provide you with forms that seek infomation about your planned tax saving investments and the tax deductions you are planning to claim.
Complete these documents with the assistance of your tax/ financial counsellor and submit them within the time frame provided by your payroll team. This will help avoid deduction of excessive tax from your salary.
4. Disciplined record maintenance
If you are self employed, you need to religiously maintain relevant information/ records/ documents as stipulated by your tax practitioner.
5. Be regular in completing your tax investments
Very often, individuals end up with a tax nightmare at the end of the year because of their failure to invest in tax saving instruments evenly through the year. This acts as a double-edged sword.
On the one hand, your credibility with your payroll team could take a knock; they might disregard your investment plan for the next year and resort to tax deduction from your salary.
Also, your skewed investment strategy may strain on your liquidity (how much cash you have in hand) at the end of the year; you may have to invest all your savings to save on tax and you may also end up higher taxes by way of TDS on salary.
6. Be regular in filing your income tax returns
As the financial year comes to an end, collect all your relevant documents and hand them over to your tax counsellor. Ensure that the returns have been filed and obtain acknowledgement for your records.
These simple steps will ensure you lead a stress-free tax life. Aim, prepare and you will certainly succeed in becoming an honest, yet efficient, tax assessee.
Relax With Tax is a Mumbai-based personal tax and finance solutions provider.
