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.
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.
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