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Are the Financial Planning And Tax Planning Sides Of The Same Coin
Written by Gagandeep Arora - Date - 2nd May 2022
As a layman or a person going about their business during the day the tax planning and financial planning would seem like two different terms. To a certain extent, it is the truth, I would have agreed with this notion in my younger years but the interpretation of these terms changed over some time for me. Not only from my experience but after working in a taxation firm over the years I can assure you they both are sides of the same coin. If you have newly started working or have been filing Income Tax returns for a long time and have a casual approach towards it then be aware you are missing out on not only great opportunities in life but decreasing your wealth creation for the future. If you want to build a corpus of funds for any important events in future you have to start in your earlier years as it cannot be built in a short period. For that tax planning and financial planning have to work together. Although financial planning is a broader term and tax planning is a very important part of it.
What are Tax Planning and Financial Planning?
Tax planning is an analysis of all your expenses and investments in a manner that you pay the lowest taxes in any financial year. Tax planning can be done for a short term or a long term period. Whereas, financial planning Personal financial planning means creating financial blueprints by setting up a savings account along with tax planning schemes as well as securing yourself with debt management or recovery plans. As you can see that financial planning is a wider term and tax planning is a part of it but sadly people do not understand its importance.
Most commonly, tax-saving investments are done at the end of the year with only one motive which is to save tax with no planning at the beginning of the year. I would like to share a story here-when I was young I would leave my exam preparation for the end times. Simply loved the rush of studying for hours with a deadline on my head. But never could I beat the topper of our class, still getting good marks was not the problem. Similarly, let us apply the same logic to our tax planning. If we plan our taxes at the beginning of our financial year then not only do we allocate our funds efficiently but gain more fruits from it. Whether you plan with the help of a financial planner or do the planning on your own but include tax planning in financial planning at the beginning of the financial year to get good results.
Objectives Of Tax Planning
Taxes are paid by an individual to the government for income earned by him or her. Sum collected by the government is further used in the development of the infrastructure in the country. In other words, the taxes paid are used for the benefit of the citizens of the country. Thus, we should pay taxes on time not only to be good citizens but for our development. Other motives fulfilled by tax planning in the FY2022-23 are-
1. Reduction in tax liability
The tax liability of a person can be reduced by investing in various tax saving schemes given by the government. To achieve full benefit from these schemes investments should be done at the beginning of the financial year.
2. Minimise Litigation
A very important facet is to minimise legal litigation by planning taxes wisely. If required, help from a professional should be taken. This saves us from judicial harassment at the end of the year-end.
3. Stabilised Economy
By paying taxes you will get a progressive economy which in return is favourable for you. If you pay all the taxes not only is it beneficial for you but a big contribution is made by you towards the stabilised economy.
4. Personal Financial Growth
Tax planning is an integral part of your own economic growth. If planned judiciously not only will you save taxes but create a good corpus required for your economic growth.
Conclusion- Tax Planning an Integral Part Of Financial Planning
Strategies and plans made at the beginning of the financial year will always be more fruitful than last-minute haste decisions made. For the FY 2022-23, be vigilant and start planning, in the beginning, your taxes along with your financial plans to achieve the desired wealth goals.
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