April 20, 2024 1:02 pm
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To understand what is tax planning and how does it work? First, you need to understand your finances. Being aware of all your cash flows is an essential part of planning your taxes accordingly.
Tax planning is not something you would learn in school and hencethe majority part of people who are paying taxes are not aware of how it works. Most of the time it is being confused with tax evasion.
An optimal tax saving plan makes sure that you reduce you tax liabilities and make efficient use of all the deductions, exemptions and benefits provided by the government itself. You can also contribute to various retirement benefits and notjust save your taxes but also invest for your future.
The first step of tax planning is to plan your finances first. What do we mean by that? You can not save your taxes in one day. It is a well strategized events of actions over the financial year with the motive to attain maximum tax efficiency.
Let’s take a dig into the world of tax planning!
In order to compute your tax liabilities, first you have to consider all your possible sources of income. After considering that, you need to categorize them in different heads of income provided under the Income Tax Law. It can be income from the head salaries, income from profits and gains from business and profession, income from capital gains or income from other sources. The total amount you get after this step is GTI i.e. Gross Total Income.
Now, you get various deductions, exemptions and benefits under each head which you can apply if applicable. That is where you can plan your tax savings. After which you get your NTI i.e. Net Taxable Income.
We’ll understand some effective tax saving plans available to get maximum benefit in tax efficiency in this blog.
Since the recent UnionBudget is presented on February 01, 2023, there has been a lot of discussions going on and debates on whether the newly proposedtax regime is beneficial or the old tax regimewe’ve been following till now? We can help you make an informed decision as to which one you should prefer as per your objectives and financial goals.
It is a unique two-way tax saving instrument with the benefits of an insurance policy and an investment as well. It has a lock in period of minimum 5 years. It invests a portion of your insurance premium towards the equity, debt or balanced funds. It not just provides a tax deduction of up to ₹1,50,000 but also the returns from the policy is exempted u/s 10(10D) of the Income Tax Act.
It is a type of retirement benefit provided by the government to all citizens of India with Tier 1 – mandatory for government employees and Tier 2 – voluntary accounts. It provides a tax benefit towards contribution to Tier 1 with a ceiling of ₹1,50,000 u/s 80CCD (1)with an additional deduction of ₹50,000 u/s 80CCD 1 (B) and deduction of up to 14% for central government employees & 10% for others u/s 80CCD (2) which is over and above deduction u/s 80C.
Any Individual or HUF can claim deduction u/s 80D on the amount paid (other than cash) for medical insurance premium, any expenditure incurred for preventive health checkup, for treatment of any specified critical health diseaseu/s 80DDB or for any contribution towards notified central government health schemes. You can claim this deduction not just for your self but also for your parents, spouse or dependents. It provides a deduction of up to ₹50,000 for self, spouse, dependents & parents below the age of 60 years and ₹75,000 – ₹1,00,000 for self, spouse, dependents &parents above the age of 60 years.
These are few of the tax saving instruments or deductions you can avail in order to plan your taxes accordingly for maximum tax efficiency. Apart from these, there are various other ways you can minimize your tax liability. There is something for ever person. Whether you are a salaried employee, an entrepreneur running a business with either traditional methods of savings like savings bank accounts, Post office deposits, recognized provident funds or more progressive investment plans. If strategized well, one can make tax planning a smooth ride and not a last-minute crisis!
At Profsindia, we make sure our clients’ needs are well understood first so that we can provide you with the most effective solution and can make you a part of our family. We are a team of professionals who work with the core value of client satisfaction and creating awareness about all the matters related to accounting, taxation, finance and all other statutory compliances.
We have over 700 happy clients regarding tax planning and compliance during the last financial year. Here’s why you should chooseProfsindia for your next tax planning journey:
There are numerous options available for savings your taxes under various sections of Income Tax Act, 1961 such as ELSS, ULIP, PPF, Interest on loan for acquiring or construction of house property, interest on loan taken for higher education, etc.
Yes, you can avail deductions on preventive health checkups and medical treatment for your parents u/s 80D & 80DDB.
You can claim the deduction u/s 80E for a child’s higher education if you are the legal guardian.
It depends mainly on your objective if you want to only save your tax liability or if you want to maximize your wealth as well. On the basis of your short- long term financial goals you can opt for the suitable tax saving instrument for yourself.
You can avail tax benefits in various other sections as well such as section 80D for medical expenses, section 80EE for interest on home loan, section 80G for donation to charitable institutions, section 80GG for HRA deduction and many more.
Here are all the eligibility requirements to claim HRA,
There is a penalty of ₹5,000 on belated returns on or before 31st Dec for the relevant financial year and ₹10,000 for later than that u/s 234F, for small taxpayers whose income does not exceed Rs. 5 lakhs it will be ₹1,000.Interest @ 1% for every month from the due date to actual date of return u/s 234A is applicable if there is a tax liability to pay.
Yes, rebate u/s 87 is allowed with revised maximum limit of ₹25,000 from F.Y. 2023-24 onwards if the taxable income up to ₹7,00,000.
Advance Tax is paid on the basis of expected tax liability for the relevant financial year. It is paid in installments of 15%, 45%, 75% & 100% on or before 15th of June, September, December & March. 100% of the advance tax is paid on or before 15th of March in case the assessee is covered u/s 44AD.
Any gift received by an Individual or HUF in the form of money without consideration, any immovable property or moveable assets such as jewelry, shares etc are taxable only when they exceed the threshold limit of ₹50,000 in the relevant financial year.
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