Talk about personal finance and tax planning is considered to be the most important aspect of all. Many people do not pay attention to tax planning and go ahead with their investments that they feel are related to tax savings. Many of them often get confused between tax and investment planning, but the fact is that they are different from one another with different objectives.
Before making an investment, one has to consider the factor of tax saving and also choose the option based on their risk appetite. People can also plan their taxes based on their age, and let us know have a look at it in detail.
Tax planning for various age groups
Age group 23 years - 30 years
Many people start their career at the age of 23 and hence, this is the right time to start the savings for the future. The investments that are made at this age should be long term investments.
One can choose to invest in ELSS or pension related schemes as it helps them to plan for their retirement well in advance. By doing so, they also provide an equity exposure to the retirement funds. Do not opt for unit-linked insurance plans; rather choose a life insurance cover that has low premium rates as you are starting your investments early.
Age group 31 years - 36 years
This is the age when professionals can take good advantage of various tax saving avenues. Professionals can contribute to provident fund, life insurance policy for self and family. One can also claim the tuition fee paid for kids under the section 80C. People from this age group can also take advantage of tax savings that can be obtained from a home loan. Principal repayment and interest repayment can be claimed as per the sections 80C and 24B. One can also opt for a health insurance policy which will be considered under the section 80D.
Age group 36 years - 45 years
One can choose the non-investment tax savings even during this age. Most of them in this age group need not make extra investment for saving taxes. If you have a home loan, the principal repayment, PF contribution by self and employer and the tuition fees etc will account for more than a lakh. When there is a need to invest in section 80C, it is important to choose the investments that are related to retirement.
This is also the right phase to undo any mistakes that have occurred when it comes to tax planning. This is the time when they can assess the tax saving investments that are already made and analyze the pros and cons of investing in them. It is also important to not overdo any investments for the purpose of tax saving.
Age group 46 years - 60 years
This is the phase when most of the people make peak earnings and this holds true especially in the case of working professionals. Many of them might have paid off their debts if any and will plan for the savings that are needed for retirement. If you are still in your 50s, it is also important to opt for a health insurance as many providers cut off at 60 years of age. The same also holds true for PPF account and hence if you haven’t got a PPF account yet, it is time to open one. If you have to make an investment, then it is ideal to choose the debt products that are related to one’s retirement.
Age group 60+
Protection of capital has to be the main motto when it comes to the investments that are made after one’s retirement. Make sure that all the investments made are in debt. Retired people can also invest in SCSS or senior citizen saving schemes as they provide timely monthly or quarterly payouts. As SCSS scheme is backed by the government, you can be sure about the security of one’s capital.
Now that you are aware of various tax planning tips for different age groups, it is time you plan your taxes wisely.