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Tata Capital > Blog > Wealth Services > Important Things to Do at the Start of the Financial Year to Save Tax

Wealth Services

Important Things to Do at the Start of the Financial Year to Save Tax

Important Things to Do at the Start of the Financial Year to Save Tax

The beginning of the financial year is a great time to review your finances and set financial goals. It not only allows you to stay on top of your financial progress and investment needs but also ensures that the rest of your year is stress-free.

However, your financial planning in April is incomplete without comprehensive tax planning. Planning for tax savings early in the financial year will allow you enough time to identify the right tax savings investments and determine how much you need to invest.

Here, we’ll discuss the important things to do at the start of the financial year to save tax.

Review and update financial goals

Begin by reassessing your financial goals and objectives for the upcoming year. Understand your income sources, expenses, investments, and liabilities to align your tax-saving strategies accordingly. A clear roadmap will help prioritise tax-saving avenues that best suit your financial profile.

Prepare a budget

Preparing a budget at the beginning of the financial year will help you allocate funds towards necessary expenses, emergency funds, and investment avenues. With a better idea of when and where you want to spend your income, a budget gives you more control of your finances.

You can adopt the 50-30-20 approach to strike a balance between necessary spending, extra expenses and savings investments and debt repayment.

Maximise contributions to tax-saving investments

Take full advantage of tax-saving investment options such as the Public Provident Fund (PPF), National Pension System (NPS), and Employee Provident Fund (EPF) under section 80C. These investments can help you reduce your taxable income by up to Rs. 1,50,000 in a financial year in the old tax regime. Increasing contributions to these accounts not only reduces taxable income but also fosters long-term savings growth.

Utilise tax deduction on health insurance

Invest in health insurance policies for yourself and family members to claim deductions under Section 80D of the Income Tax Act.

Under this section, the premium paid on health insurance for self, children, spouse, or dependant parents is eligible for tax benefits up to Rs. 1,00,000 depending on the age of the taxpayer and dependant parents.

Evaluate retirement planning options

If you haven’t started your retirement planning, the beginning of the financial year is a good time to do so for tax savings. Assess various opportunities for retirement planning, like the National Pension System (NPS) or Atal Pension Yojana (APY).

Contributions to these schemes help secure your retirement and offer tax benefits under Section 80CCD of the Income Tax Act. As per 80CCD(1), employee contributions are eligible for a tax deduction of up to 10% of their salary + dearness allowance up to Rs. 1,50,000, while under 80CCD(2), an additional Rs. 50,000 is eligible for deduction within NPS self-contribution. Under this section, you can also claim a tax deduction for employer’s contribution to NPS.

Plan for capital gains

Capital gains are the profits realised by an investor on the sale of assets such as land, property, vehicle, jewellery, or shares. Under section 54 of the Income Tax Act, you’ll have to pay long-term capital gains if you sell land, unlisted shares, or immovable property held for more than 24 months. However, assets like listed securities, units of equity-oriented funds, and zero-coupon bonds will be treated as long-term capital assets if hold them for over 12 months.

Investors can save tax under section 54 on the sale of residential property, under section 54F on the sale of other assets, and section 54EC on the sale of long-term assets like land, house property, or commercial property.

Stay informed on tax law changes

Stay updated on changes in tax laws and regulations to adapt tax strategies accordingly. Legislative amendments or policy shifts may introduce new tax-saving opportunities or alter existing provisions. Connect with tax professionals or utilise online and offline sources to stay informed and compliant with evolving tax laws.

In the end

A proactive approach to financial and tax planning at the beginning of the financial year can go a long way in empowering individuals and businesses in India to optimise their tax savings and enhance their financial well-being.

Start smart tax planning to maximise your savings with Tata Capital Wealth. Connect with our financial experts to explore the best tax-saving strategies and invest in tax-efficient instruments for a secure tomorrow.

Visit the website today.

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