Mastering Tax Savings: 7 Strategic Hacks
March 14th, 2024 Blog
As the new fiscal year approaches, it's prime time to gear up for tax season and arm yourself with savvy strategies to trim your tax bill while staying compliant with the law. Knowledge is power when it comes to navigating the intricacies of tax-saving solutions. To empower you as a proficient tax saver and slash your income tax liability in 2024, let's delve into seven practical strategies.
1. Leverage 80C Deductions:- With a maximum limit of ₹150,000, Section 80C offers an array of avenues to minimize your tax burden. Consider investments in Equity Linked Savings Schemes (ELSS) alongside mandatory deductions like Provident Fund (PPF) contributions. ELSS, with a minimum lock-in of three years, presents the potential for substantial returns primarily from equity investments. Additionally, explore options such as tax-saving FDs, EPF, insurance premiums, NSS, SSY and more under Section 80C.
2. Unlock Benefits of Section 80CCD:- Contributions to the National Pension System (NPS) can yield extra tax benefits. Section 80CCD(2) allows deductions for employer contributions to NPS accounts, while Section 80CCD(1B) offers an additional deduction of up to ₹15,000 on investments of ₹50,000. NPS provides a diversified portfolio for long-term wealth accumulation.
Please note: At the time of maturity of NPS subscriber can only withdraw 60% of the corpus as lumpsum with tax benefit, rest 40% need to purchase annuities that would go towards paying monthly pension.
3. Harness 80D for Medical Expenses:- Safeguard your health and finances with Section 80D, which provides deductions for medical expenditures, including health insurance premiums. Ensure comprehensive coverage through personal health insurance to mitigate unexpected medical costs while enjoying tax benefits.
So you now know about claiming medical insurance premiums under 80D. But did you know about the additional deduction for preventive health check-ups?
Preventive health check-ups upto ₹5,000 for your whole family can be included in overall limit
4. Explore Deductions under Section 24:- Section 24 offers two types of tax deductions. Standard deduction, applicable to all taxpayers, exempts 30% of the net annual value. Additionally, interest on home loans for self-occupied properties can qualify for exemptions of up to ₹2 lakh, with provisions for loans taken before property purchase or construction completion.
5. Maximize 80GG for Rent Savings:- Section 80GG is a boon for individuals without House Rent Allowance (HRA) or homeowners. Eligible taxpayers can claim exemptions based on rent paid, subject to specific conditions, providing relief for rental expenses.
- Applies to individuals without HRA benefits or business owners/freelancers in rented houses.
Conditions include deducting 10% of total income or ₹5,000 per month or 25% of total income for rent paid. The lowest amount among the three conditions is eligible for exemption.
6. Leverage Interest Deductions under Sections 80TTA and 80TTB:- Section 80TTA aimed at providing tax relief to individual and HUFs allows deductions of up to ₹10,000 on interest earned from savings accounts. For senior citizens aged 60 or above, Section 80TTB a resident senior citizen who is 60 years or above can claim deductions of up to ₹50,000 on specified interest income from Banks, Post office, excluding certain sources like company FD interest.
7. Utilize Section 80E for Educational Loans:- Ease the burden of educational expenses by leveraging Section 80E, which allows deductions on interest paid towards educational loans for self, spouse, or children pursuing higher studies.
Note- All of the following deduction benefit if you are in Old TAX REGIME
Here are a few calculations to which will help you decide between old vs the new tax regime:
Bonus Tips:-
- Ever Heard of Tax Harvesting:- Optimize long-term gains from equity funds by utilizing Tax Harvesting techniques to strategically realize gains and maximize tax savings.
Long-term gains from equity funds are taxed at 10%. Tax Harvesting is a technique that reduces this impact. It utilises the ₹1 Lakh annual LTCG exemption by selling and buying back part of your investment such that you “realise” gains every year.
Example: Lets say you invested 10Lakhs and Value of it is 13Lakhs after 3 years: Calculation
This strategy lets you realize profits strategically and save big on taxes. Don't miss out on this!
The concept applies to selling both shares or equity mutual fund units.
The concept applies to selling both shares or equity mutual fund units.
- Invest in Parents' Name:- Explore tax-efficient strategies by transferring funds to parents under gift deed and investing in their names to leverage relevant exemptions. Investing on behalf of non-earning spouses allows you to take advantage of relevant exemptions and maximize your tax planning techniques.
- Create a Hindu Undivided Family (HUF):- Consider establishing an HUF can be tax- efficient way to handle manage various revenue streams, including as gifts, real estate, business and capital gain. Your overall tax situation can be maximized by making deductions and exemptions granted to HUF entities.
- Carry Forward Losses:- Turn past stock market losses into future gains by utilizing Carry Forward Loss provisions, ensuring you file returns to avail of this benefit. You can set off and carry forward losses for up to 8 years.
By implementing these tax-saving strategies intelligently, you can effectively reduce your tax liabilities and optimize your financial health in the upcoming fiscal year. Remember to consult with a Financial & Tax advisor to tailor these strategies to your specific circumstances and ensure compliance with tax laws.
Start planning today to reap the rewards of tax efficiency tomorrow!