Saving taxes is one goal that we’re all motivated by! It does not take much to persuade investors to choose specific financial products if they are assured about the tax savings or benefits available with the same. Yet, as the new financial year approaches, what can be your tax-saving strategy to maximise your benefits? Unfortunately, most people put off tax planning well until the financial year ends.
However, you should always start planning in advance with a view towards having ample time to chalk out your investment strategy and consult professionals for their guidance. Here are some tips to guide you in maximising your tax benefits this year.
Key Tax Planning Tips That You Should Not Neglect
There are several tips for mastering tax planning in the new financial year that are mentioned here for your benefit. Make sure you take a closer look at them.
- Understand Your Taxable Income – To understand your available pay is the most important step in charge arrangement. This includes your salary, rental income, capital investments, and other sources of income. You may start setting up your expenses after you have a decent idea of your pay.
- Understand The Types Of Tax-Saving Investments Available– The Indian government offers several tax-saving investments, such as the Public Provident Fund (PPF), the National Pension System (NPS), and others. There are other tax-saving options like life insurance products, health insurance, ELSS (equity-linked savings scheme), Sukanya Samriddhi Yojana (SSY), tax-saver FDs (Fixed Deposits), and the like. You should devote some time towards learning more about the tax-saving options that are available.
- Understand The Deductions That You Can Get- Tax deductions are those investment amounts that are slashed from your taxable income, thereby reducing your tax liabilities. You should look at the applicable sections for tax deductions, including Sections 80C, 80D, and others. Deductions may cover a wide gamut of aspects, including life insurance products, health insurance, donations (Section 80G), education loan repayments, home loan principal and interest repayments, tuition fees of children, and so on.
- File Your Taxes On Time- Filing your taxes on time not only avoids penalties and interest but also ensures that you have enough time to plan your taxes for the next financial year. Make sure to keep all your documents and receipts to file your taxes accurately.
Now that you know the basics of tax planning, here is a basic guide to help you maximise your benefits while simultaneously securing your family’s financial future. This is possible with insurance plans of various types.
How Insurance Secures Your Family And Ensures Attractive Tax Benefits
You can consider various types of insurance for maximising your tax benefits in the new financial year. These include the following:
- Life Insurance- There are a few types of life insurance, including term insurance, ULIPs, endowment plans, and child plans. Premiums payable for these life insurance products will get you tax deductions under Section 80C of the Income Tax Act up to Rs. 1,50,000. This section also covers several other types of investments, so you should structure your allocation accordingly. You should remember that plans like ULIPs (unit-linked insurance plans) combine both investments and life coverage. You can thus get tax deductions on your premium payments while ensuring future wealth creation as well. Term insurance is, however, a must for your portfolio since it financially safeguards your family from your unfortunate demise within the policy period. You can also integrate riders like critical illness or other health-related riders in your life insurance policy. Premiums paid for the same will get you deductions under Section 80D (which applies to health coverage premiums).
- Health Insurance- Health insurance premiums are eligible for tax benefits under Section 80D of the Income Tax Act. You can get deductions up to Rs. 25,000 if you are a non-senior citizen and Rs. 50,000 if you are a senior citizen. You can avail of deductions on premiums paid for health insurance plans for your parents, spouse, and children, subject to the overall limit.
These are insurance plans that should be present in your portfolio, not just for their tax benefits but also for the security that they bring to the table. With suitable life and health insurance coverage, you ensure that your family is financially equipped for various unforeseen scenarios, including your death, medical emergencies, and so on.
This is the biggest reason for including insurance in your investment basket for the new financial year. But, of course, the tax deductions are handsome too! While chalking out your tax-planning strategy, make sure to consult your financial advisor or tax consultant. It will help you get a better understanding of the available deductions, tax-saving instruments, and other vital aspects. Knowing your taxable income, as mentioned, is the pivotal starting point for you this year. Here’s to a great FY2023-24, tax-wise!