Tax Planning Guidelines

• Spread the taxable income among the various members in your family;
• Take full advantage of tax exemptions available under the law;
• Take full advantage of permissible tax deductions and rebates available on stipulated tax-saving investments;
• Make optimum use of tax-exempted incomes; and
• Simple tax planning is smart tax planning

Tax Planning benefits

The long term benefit of tax planning can easily be illustrated using the following example. For instance, suppose we assume a 12% annual return on investment, which in this booming economy is a very conservative rate of return. If you were to save one dollar in taxes today, it would be worth two dollars in 6 years, four dollars in 12 years, eight dollars in 18 years, sixteen dollars in 24 years, and thirty-two dollars in 30 years. Now imagine what the compounded rate of return would be like on a thousand dollars, or even $10,000. The advantage of tax planning now is what that money will be worth to you, if you invest it systematically, 12, 18, 24 or 30 years from now.

Tax planning is done in order to reduce the tax liability whereas the tax management is paying the taxes in compliance with the set rules. The tax planning is done for the future whereas the tax management relates to the past, present and future.

Tax planning is not at all a complex process provided the tax planner knows the tax code. The complete knowledge is not necessary all he needs to know is the correct tax slabs and the various deductions allowed. Today as we are living in a very busy world we tend to overlook at the tax planning and hurry things when the due date is fast approaching where as if there is a proper tax plan then we will be reducing the tax liability.

Experts usually recommend that individuals,entrepreneurs and small business owners conduct formal tax planning sessions in the middle of each tax year. This approach will give them time to apply their strategies to the current year as well as allow them to get a jump on the following year.

Tax planning begins in January and goes on throughout the year. If you haven’t taken a look at your tax situation this year, now is the right time to begin, before the year quickly comes to an end.