Plan early, choose wisely and invest smartly to enter FY 2025–26 with lower tax and greater financial stability. Most salaried individuals rush into tax planning at year-end, leading to poor choices and stress. With the New Tax Regime taking focus for FY 2025–26, early planning is wiser—it reduces tax, improves cash flow and clarifies long-term goals. The guidelines below provide a simple, structured approach. 1. Choosing Your Tax Regime Your first step is choosing between the Old Regime and the New Regime. This single choice shapes your entire tax year. The Old Regime suits taxpayers who claim multiple deductions, offering many exemptions for those paying rent, servicing a home loan or investing in PPF, ELSS and insurance, though tax rates are higher. The New Regime is better for those with few deductions, providing lower rates but limited exemptions, and has been the default since FY 2023–24. Professional CA tip: At the start of April, prepare a sheet listing expected 80C investments, health insurance, home loan interest, HRA exemption, NPS and other deductions, then compare both regimes to see which results in lower tax. 2. Maximise Section 80C Section 80C allows a deduction of up to Rs. 1,50,000. Typical 80C options include EPF, PPF and ELSS. Other eligible choices include life insurance premiums, 5-year tax-saving FDs, Sukanya Samriddhi Yojana, children’s tuition fees and home loan principal. Tip: Check how much EPF already covers before investing more. Many employees unknowingly overinvest. 3. Sec. 80D: Med. Ins. Deduction Health insurance offers both tax relief and financial protection. You can claim a deduction of Rs. 25,000 for premiums paid for yourself, your spouse and your children, and an additional Rs. 50,000 if you are paying for health insurance for your senior-citizen parents. Why it matters: Medical costs are rising, and one emergency can wipe out savings. Buying a policy early keeps premiums lower and ensures the full deduction. 4. Fully Use HRA HRA is a key tax saver for salaried individuals in rented homes. The exemption is the lowest of three values: actual HRA received, 50 per cent of salary in metros (40 per cent in non-metros), or rent paid minus 10 per cent of salary. To claim it, you must submit rent receipts, a rent agreement and your landlord’s PAN if annual rent exceeds Rs.1 lakh. Common mistake: Waiting till year-end for receipts. Keep them monthly. 5. Home Loan Deductions A home loan offers two main tax benefits: up to Rs. 2 lakh a year as an interest deduction under Section 24(b) for a self- or family-occupied property, and principal repayment eligible under Section 80C within the Rs. Rs.1.5 lakh limit. Joint loans: If the property is jointly owned and both borrowers pay EMIs, each may claim deductions. 6. National Pension System (NPS) NPS provides an extra Rs. 50,000 deduction under Section 80CCD(1B) beyond the 80C limit. It is a strong long-term retirement option, investing across equity, bonds and debt for balanced growth. CA tip: Employer NPS contributions remain tax-beneficial even under the New Regime. 7. Leave Travel Allowance (LTA) LTA can be claimed only for travel within India and only for actual travel fares—bus, train, or air. It does not cover food, accommodation, sightseeing or tour packages. You may claim LTA twice in a four-year block. Keep original tickets. 8. Salary Structure Review Your salary structure affects your tax benefits, yet many people overlook it and lose exemptions. Adding tax-efficient components such as meal coupons, fuel and phone reimbursements, a books and newspaper allowance, and a uniform allowance (where applicable) can help optimise your take-home pay. Ask HR if these can be added to reduce taxable income. 9. Manage Capital Gains If you invest in shares or mutual funds, plan your capital gains early. Long-term gains up to Rs. 1 lakh a year are tax-free, so spreading your sales can lower tax and help you avoid large, last-minute redemptions. Early planning helps manage profits and taxes better. 10. Submit Proofs on Time Missing investment or expense proofs can increase TDS and reduce your take-home pay, so submit them on time. Ensure you provide all key documents, including rent receipts, insurance and investment proofs, NPS statements and your home loan interest certificate. Timely submission keeps TDS correct and reduces refund delays. 11. Begin Planning in April Last-minute tax planning can lead to unnecessary expenses, while early planning helps you spread investments, pick suitable products, avoid unwanted policies, and protect your emergency fund. Tax planning is not just about reducing tax; it helps build a strong financial base. Choose the right regime, claim eligible deductions, optimise your salary structure and invest early. With proper planning before FY 2025–26 starts, you can achieve better savings, a lower tax burden and greater long-term stability. (The writer is a Chartered Accountant based in Thane. Views personal.)
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