When individuals navigate the complex landscape of tax law and investment options, it is paramount that they carefully understand key considerations. (Representative image)
From deciphering tax slabs and rates to leveraging the potential of tax-saving investments, each step in this journey is meaningful.
A new fiscal year is upon us. Here's your opportunity to optimize your tax and savings planning for FY 24-25. There is a significant change this year with a new tax system becoming the default option. Starting your financial journey for fiscal year 2024-2025 requires a strategic approach to tax and savings planning. When individuals navigate the complex landscape of tax law and investment options, it is paramount that they carefully understand key considerations.
Also Read: Surprise No Income Tax From April 1: Government Clarifies Doubts About Tax System, Get Inside Details
From deciphering tax tables and rates to leveraging the potential of tax-saving investments, each step on this journey is meaningful. Let us begin this exploration by exploring the pivotal aspects of forming an effective tax and savings plan in the dynamic Indian financial environment.
Here are some key things to keep in mind for tax and savings planning for FY 24-25:
- Tax system: New tax regime default – As of Mid-Budget 2024, the new tax regime is the default option. To qualify for the deduction under the existing system, you must specifically select it when you file your return.
- Understand your tax saving options:
-Deduction under Section 80C: You can claim deduction on investments up to Rs. 1.5 lakh under Section 80C. Popular options include:
– Public Provident Fund (PPF)
-Employees Provident Fund (EPF)
-Equity Linked Savings System (ELSS)
-National Savings Certificate (NSC)
-Sukanya Samriddhi Yojana (for girls)
-Unit Linked Insurance Plan (ULIP) (Note: Tax benefits for ULIPs may be limited in the new regime)
- Tax table and rates: Understand the latest tax slabs and rates applicable to individuals, including changes introduced in the FY 24-25 Budget.
- NPS Contribution: Consider contributing to the National Pension Scheme (NPS) to avail additional tax benefits under Section 80CCD(1B).
- Health Insurance: Invest in a health insurance policy for you and your family to avail the deduction under Section 80D of the Income Tax Act.
- Home loan interest: If you have a home loan, do not forget to claim deduction for interest portion under Section 24(b) and principal repayment under Section 80C.
- Education Loans: If you or your dependents have taken an education loan, the interest paid on the same is eligible for deduction under Section 80E.
- Long Term Capital Gains (LTCG): Be aware of the tax implications of long-term capital gains from equity investments and real estate transactions. A tax of 10% is levied if the LTCG of the stock exceeds Rs. $1 million per fiscal year.
- Mode 15G/15H: If your total income is below the taxable limit, file Form 15G/15H with banks and financial institutions to avoid TDS deduction on interest income.
- Advance tax: Pay your advance tax timely if your tax liability exceeds Rs. 10,000 in a financial year to avoid fines.
- Tax deducted at source (TDS): Ensure that TDS is properly deducted and deposited against your PAN by your employer, bank or other deductible institution.
- Tax Planning for Freelancers and Business Owners: If you're self-employed or own a business, track your deductible expenses and take advantage of provisions like the estimated tax system if you qualify.
- Gift tax: Understand that you may be subject to gift tax if you give or receive a gift that exceeds certain limits.
- Investment Review: Review your investment portfolio regularly to ensure it matches your financial goals and risk appetite.
- Emergency Fund: Maintain an emergency fund to cover unexpected expenses and avoid missing out on long-term investments.
- Consult with a tax expert: If your financial situation is complex or you are unsure about your tax planning strategy, seek the advice of a tax consultant or financial planner.
Planning and Optimization:
- Start early: Don't wait until the last minute to make tax-saving investments. Distribute them throughout the year for a systematic approach.
- Choose the right system: Evaluate new and existing tax systems based on income, deductions and investments to see which one is more advantageous.
- Align your investments with your goals: Consider your financial goals (retirement, children's education) while choosing tax-saving investment options. Not all options offer high returns along with tax benefits.
disclaimer: The expert views and investment tips contained in this News18.com report are the opinions of experts and not the opinions of the website or its management. Readers are advised to check with certified professionals before making any investment decisions.