Welcome to our tax-saving guide! We're here to help you keep more of your hard-earned money in your pocket. Let's explore some easy ways to legally reduce your taxes in the upcoming financial year 2024-2025. Say goodbye to last-minute tax panic and hello to stress-free planning!
Financial check-up
Start the new financial year by reviewing your finances. Think about potential changes that could lower your taxes and boost your wealth. When you get a salary increase, remember that a higher income can push you into a higher tax bracket.
For example, if you earn Rs.10 lakhs a year and get a 20% raise, your tax bracket would jump from 20% to 30%. This means the extra Rs.2 lakhs earned beyond the Rs.10 lakhs would be taxed 10% higher. Similarly, a person earning Rs.48 lakhs annually who gets a 10% raise will face an extra 10% surcharge on their ncome tax.
Boost Your Tax Savings with NPS
Many employers offer the National Pension System (NPS) as a tax-saving option, but few employees use it. Contributions of up to 10% of your basic pay are tax-free under Sec 80CCD(2). The NPS is cost-effective and often provides better returns than other retirement options like the Provident Fund (PF), Public Provident Fund (PPF), and insurance plans.
The NPS allows partial withdrawals, with 60% of the maturity amount being tax-free. The remaining 40% will be used to buy an annuity, but since retirement income is usually lower, this is almost tax-free. This option is especially beneficial for high-income earners with good liquidity.
Invest Early for Optimal Tax Benefits
Don't wait until the last few months of the financial year to start tax-saving investments. If you're considering an Equity-Linked Savings Scheme (ELSS) fund, start a Systematic Investment Plan (SIP) right after April. This spreads out the investment risk over time rather than making a lump sum investment at the end of the year.
For safe fixed-income options like the PPF, invest early to take full advantage of compounding. The longer you invest, the greater the power of compounding, leading to significant wealth creation over time.
Adjust Your Salary Components for Tax Efficiency
Many companies allow employees to modify their Cost-to-Company (CTC) structure at the start of the financial year. Take this opportunity to include more tax-efficient perks like reimbursement of telephone and internet bills, fuel and travel expenses, meal coupons, and newspaper bills. While the car lease option is less attractive after GST, expenses such as driver salary, petrol, insurance, and maintenance are still beneficial.
With COVID-related travel restrictions easing, now is a good time to utilize the Leave Travel Allowance (LTA) as a tax saver. Travel expenses for your family can be tax-exempt as part of your CTC. Just ensure that LTA is included in your CTC at the beginning of the year since it cannot be added later or claimed while filing your income tax return.
Use Form 15G/15H to Avoid TDS on Interest Earnings
If your income does not exceed the basic exemption limit, you can avoid Tax Deducted at Source (TDS) on your interest income by submitting Form 15G or 15H. Be sure to meet the eligibility criteria for these forms. Falsely claiming eligibility can result in tax evasion penalties.
Bottom Line
We hope these tax-saving tips empower you to reduce your tax liability and enhance your financial health. Remember, the key to successful tax planning lies in starting early, investing in the right instruments, and making the most of every tax-saving opportunity available to you. With careful planning and strategic actions, you can maximize your savings and secure a brighter financial future. Happy tax planning!
Don’t miss out on these and other advantages—click here to calculate your tax liability and see how much tax you can save .Also check our article explaining the tax regimes that will be most beneficial to you.
Still have questions? Contact us for personalized assistance.