Reminder: Invest Timely for Tax Returns FY 2023-2024

 

A Timely Reminder: Invest Smartly for Maximum Tax Returns in FY 2023-2024

 

  Overview of Last-Minute Tax-Saving Strategies

 

As the financial year approaches its close, it's critical to review your tax-saving investments and expenditures, ensuring you don't end up paying higher taxes. This is especially important considering the dynamic landscape of tax regulations.

 

 Traditional Investment Tools

 

Delve into the Income Tax Act's Section 80C, covering PPF, NSC, Sukanya Samriddhi Yojana, 5-year FD, ELSS, and life insurance policies. Additional deductions under Section 80CCD(1b) can be obtained through contributions to the National Pension System (NPS).

 

 Unique Deductions under Section 80C

 

Explore unique deductions under Section 80C, such as expenses on approved skill development courses, investments in green energy initiatives, start-ups, home office expenses, fitness-related costs, and rental payments for lower-income groups. These innovative deductions, coupled with traditional options, significantly reduce taxable income.

 

Regime: Unlocking Investment Options

Consult a tax consultant and choose between  Old Tax Regime and new regime to unlock various investment options under Section 80C, reducing your taxable income. This choice opens avenues for specific deductions that may not be available in the new tax regime.

 

 Key Investment Options under Section 80C

 

Under Section 80C, enjoy deduction benefits of up to ₹1.5 lakh per year. Term Life Insurance premiums qualify for deductions, providing financial security to dependents. ELSS, with a 3-year lock-in period, offers potential returns through equity exposure.

 

As of my last knowledge update , the deduction limit under Section 80D of the Income Tax Act for medical insurance premiums paid for self, family, and parents is as follows:

 

1. For Self, Family, and Children: The maximum deduction is ₹25,000.

 

2. For Parents (Below 60 years): An additional deduction of up to ₹25,000 is allowed.

 

3. For Parents (60 years and above): If parents are senior citizens, the maximum deduction for their premiums is ₹50,000.

 

So, the total deduction limit can go up to ₹75,000 if an individual, along with their family and parents (who are senior citizens), is covered under a medical insurance policy.

 

Please note that tax laws are subject to change, and it's advisable to check for the latest updates or consult with a tax professional for the most accurate and current information.

 

Specialized Savings: Sukanya Samriddhi Yojana and PPF

 

Secure the future of girl children with Sukanya Samriddhi Yojana, offering tax benefits and tax-free interest. PPF, with a 15-year maturity period, provides secure and tax-efficient long-term savings. Additionally, explore the option to extend PPF accounts indefinitely in blocks of 5 years after maturity.

 

Boosting Retirement Savings with NPS

 

Contribute to the National Pension System (NPS) for additional deductions under Section 80CCD(1b), offering up to ₹50,000 per financial year for retirement planning. This not only enhances your retirement corpus but also provides valuable tax benefits.

 

Beyond Investments: Additional Deductions

 

Beyond tax-saving investments, explore deductions for interest on home loans, medical treatment expenses, and donations to specified funds or trusts. Claim up to ₹2 lakh on home loan interest under Section 80C. Deduct up to ₹1.25 lakh for medical treatment expenses for severe disabilities. Donations can offer up to 100% deductions, aligning your philanthropic efforts with tax-saving goals.

 

Evaluating Tax Liability: Old vs. New Tax Regime

 

Evaluate your tax liability in both old and new tax regimes before finalizing investments. The deadline for completing tax-saving investments for the current financial year is March 31, 2024. Failure to do so, especially in the old income tax regime, may result in higher tax outgo.

 

Tax under old vs New regime 

Here are a few calculations to which will help you decide between old vs the new tax regime:

when total deductions are ₹1.5 lakhs or less: new regime will be beneficial

when total deductions are more than ₹3.75 lakhs: old regime will be beneficial

when total deductions are between ₹1.5lakhs to ₹3.75 lakhs: will depend on your income level

“According to the analysis, now the break-even income salary is Rs.7.5 lakh. In the old tax regime, an individual with a salary income of Rs.7.5 lakh claiming maximum exemptions and deductions of Rs.2.5 lakh will be able to bring down the taxable income to Rs.5 lakh. This makes him eligible for a rebate under Section 87A in the old tax regime and his tax liability becomes zero. If the same individual opts for the revised new tax regime, then he/she can claim a standard deduction of Rs.50,000 ((introduced for the new tax regime), claim a rebate under Section 87A (for income up to Rs 7 lakh) in the revised new tax regime and will have a zero tax liability.”

 

 Last-Minute Options for Tax-Saving Investments

 

Consider options like 5-year bank fixed deposits, home loan prepayment, and investments in PPF or ELSS schemes if you haven't completed your tax-saving exercise. Certain expenditures, such as children's tuition fees and home loan principal repayment, are eligible for deductions.

 

Ensuring Account Activity: PPF and Beyond

 

Deposit the minimum amount in tax-saving instruments like Public Provident Fund by March 31 to prevent accounts from becoming inactive. For expert advice on maximizing these benefits, consult financial experts and ensure you make well-informed choices for your financial stability.

 

Conclusion: A Roadmap to Financial Well-being

 

This comprehensive guide equips you with the knowledge to navigate the intricate landscape of tax-saving options, combining traditional and innovative strategies to optimize your financial well-being. As the fiscal year comes to a close, make informed decisions to not only reduce your tax liability but also secure a stable and prosperous financial future. Remember, strategic tax planning is a key component of overall financial planning, and staying proactive can lead to substantial long-term benefits.

 

End of Article.

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Disclaimer:

It is essential to verify the latest regulations or consult with a qualified tax professional for accurate, up-to-date advice tailored to your specific circumstances. This content is for informational purposes only and should not be considered as professional financial or tax advice.