Tax Saving Vs. Tax Planning
“All men make mistakes, but only wise men learn from their mistakes.”- Sir Winston Churchill.
The above proverb is very much relevant to our daily lives – be it handling finances or even in any other facets of life.
Moreover the famous author John C. Maxwell has also quoted “A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.” But again, this is conveniently forgotten by many, which often leads to failure to learn from mistakes.
One More proverb “ Better to learn from others experience of Mistakes than to learn by doing our own mistakes as life is too short do to do all mistakes”..
As the financial year draws to a close, we all start feeling the heat and realise that yes, now we have to invest in order to save tax. But have you ever wondered whether it is the prudent way for tax planning?
Remember, waiting until the last minute to undertake your tax planning exercise will often drive it towards mere “tax saving” rather than “tax planning”; which in our opinion is a sub-optimal way to undertake a tax planning exercise.
Unlike “tax saving” which is generally done through investments in tax saving instruments / products, under “tax planning” we take into consideration one’s larger financial plan after accounting for one’s age, financial goals, ability to take risk and investment horizon (including nearness to financial goals). By adapting to such a method of “tax planning”, you not only ensure long-term wealth creation but also protection of capital.
Hence, please remember to commence your “tax planning” exercise well in advance by complementing it with your overall investment planning exercise.