Tax planning is the analysis of one’s financial situation from a tax efficiency point of view so as to plan one’s finances in the most optimized manner. Tax planning is a legal way of reducing income tax liabilities. Tax planning allows a taxpayer to make the best use of the various tax exemptions, deductions and benefits to minimize their tax liability over a financial year. It helps you to save your taxes in ways that are legally recognized and allowed. Tax planning will help you understand what expenses will lead you to pay more taxes and what investments will help you avoid taxes. You will learn about tax exemptions and what investments will provide greater interest rates and returns in long term. Tax planning will help you save that extra amount and put it to good use in investments and securities that will earn you interest and provide you tax exemptions on your income.