Happy New Financial Year 24-25: Why Taxpayers Must Keep These Things In Mind?

The new financial year is upon us, and with it comes the opportunity to optimise your taxes and savings plan for FY 24-25. This year, there’s a key change with the new tax regime becoming the default option. Embarking on the fiscal journey of the FY 2024-2025 demands a strategic approach to tax and savings planning. As individuals navigate through the intricate landscape of tax laws and investment options, a prudent understanding of key considerations becomes paramount.

Also Read: No Income Tax Surprises From April 1: Govt Clarifies Doubts On Tax Regimes, Check Details Inside

From deciphering the tax slabs and rates to harnessing the potential of tax-saving investments, each step in this journey holds significance. Let’s embark on this expedition, exploring the pivotal aspects that shape effective tax and savings planning in the dynamic Indian financial landscape.

Here are some key things to keep in mind for tax and savings planning in FY 24-25;

• Tax Regime: New Tax Regime Default- As of the interim budget 2024, the new tax regime is the default option. If you want the benefits of deductions under the old regime, you’ll need to specifically opt for it while filing your return.
• Understanding Tax Saving Options:

-Deductions under Section 80C: You can claim deductions for investments up to Rs. 1.5 lakh under Section 80C. Popular options include:

-Public Provident Fund (PPF)

-Employee Provident Fund (EPF)

-Equity Linked Saving Schemes (ELSS)

-National Savings Certificate (NSC)

-Sukanya Samriddhi Yojana (for girl child)

-Unit Linked Insurance Plans (ULIPs) (Note: Tax benefits on ULIPs may be limited in the new regime)

• Tax Slabs and Rates: Understand the latest tax slabs and rates applicable for individuals, including any changes introduced in the budget for FY 24-25.
• NPS Contributions: Consider contributing towards the National Pension System (NPS) for additional tax benefits under Section 80CCD(1B).
• Health Insurance: Invest in health insurance policies for yourself and your family to avail deductions under Section 80D of the Income Tax Act.
• Home Loan Interest: If you have a home loan, remember to claim deductions on the interest component under Section 24(b) and principal repayment under Section 80C.
• Education Loan: If you or your dependents have taken an education loan, the interest paid on it is eligible for deduction under Section 80E.
• Long-term Capital Gains (LTCG): Be aware of the tax implications on long-term capital gains from equity investments and property transactions. LTCG from equities is taxed at 10% if it exceeds Rs. 1 lakh in a financial year.
• Form 15G/15H: If your total income is below the taxable limit, submit Form 15G/15H to banks and financial institutions to avoid TDS deduction on interest income.
• Advance Tax: Ensure timely payment of advance tax if your tax liability exceeds Rs. 10,000 in a financial year to avoid penalties.
• Tax Deducted at Source (TDS): Verify that TDS is appropriately deducted and deposited against your PAN by your employers, banks, or any other deductors.
• Tax Planning for Freelancers and Business Owners: If you’re self-employed or own a business, keep track of deductible expenses and utilise provisions like presumptive taxation schemes if eligible.
• Gift Tax: Understand the implications of the gift tax if you give or receive gifts exceeding specified limits.
• Review of Investments: Periodically review your investment portfolio to ensure it aligns with your financial goals and risk appetite.
• Emergency Fund: Maintain an emergency fund to cover unforeseen expenses and avoid dipping into long-term investments.
• Consultation with Tax Experts: If your financial situation is complex or if you’re unsure about any tax planning strategies, seek advice from tax consultants or financial planners.

Planning and Optimisation:

• Start Early: Don’t wait till the last minute to make tax-saving investments. Spread them throughout the year for a disciplined approach.
• Choose the Right Regime: Evaluate the new and old tax regimes based on your income, deductions, and investments to see which one benefits you more.
• Align Investments with Goals: Consider your financial goals (retirement, child’s education) while choosing tax-saving investment options. Not all options offer high returns alongside tax benefits.