Here are some last-minute tax planning advice before March 31.
Tax planning |
In fiscal years 2021–22, the deadline for making tax-saving investments is March 31, 2022. Individuals who are late risers have only a few weeks left. Here are some tips to keep in mind.
Make significant investments and expenditures (Section 80C)
Contributions of up to Rs 1.5 lakh per financial year to approved avenues such as the Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Senior Citizens Savings Scheme (SCSS), life insurance premium, National Saving Certificate (NSC), tuition fee, Sukanya Samriddhi Yojana (a girl-focused savings scheme), National Pension Scheme (NPS), equity-linked saving scheme (ELSS), and home loan principal repayment are tax-deductible. While there are numerous competing options, a thorough evaluation of them might help you arrange your taxes more successfully.
Also Read : Five Rules for Better Financial Health!
Given the time constraints, you might want to hurry through this chapter.
On the other hand, a methodical approach might be more beneficial. You may be qualified to contribute to the EPF if you earn a wage. You may also be making a payment for your children’s tuition or a life insurance policy. Get a provisional statement of loan repayment for the current year from your mortgage lender if you have an outstanding home loan.
This will give you an estimate of how much money you’ve put into permissible investment channels under Section 80C of the Internal Revenue Code. You can then invest accordingly if a shortfall emerges. “Determining what you’ve already paid that can be claimed as a tax deduction would help you reduce the amount of money you need to invest,” says Parul Maheshwari, a Mumbai-based certified financial adviser.
If a gap emerges, you should first think about your current obligations. PPF and Sukanya Samriddhi Yojana (SSY) accounts from prior years are included. Each of these should receive a minimum of Rs 500 and Rs 250. You should contribute up to the legal annual maximum of Rs 1.5 lakh if they are contributing to your financial goals, like as retirement preparation or a child’s higher education. Premiums paid to renew existing life insurance policies are also tax deductible.
If you don’t have any of the aforementioned obligations, you’ll need to assess your financial needs and make appropriate investments.
Tax preparation | Do not rush into taking out a home loan or obtaining a traditional life insurance policy or a unit-linked insurance plan that demands large monthly payments. Such purchases can be a strain on your resources if they don’t fit your needs, as they are long-term commitments that should only be undertaken after comprehensive investigation. “If you’re in a hurry, stick to simple products like NSC or ELSS,” suggests Pankaj Mathpal, founder and managing director of Optima Money Managers.
If Section 80C has been exhausted, look into Section 80CCD1B, which allows you to deduct an additional Rs 50,000 in taxes if you invest in NPS.
This is in addition to the tax deduction under Section 80C.
If you’re a conservative investor, NSC is a good option, whereas if you’re an elderly person, SCSS is a good option. For aggressive investors, ELSS, or tax-saving funds as they are also known, make sense. With a three-year lock-in period and the potential for considerable gains, ELSS is the best option. Because it invests in equities, however, it may not be suitable for all investors, especially those who are cautious. “The stock market downturn has produced an appealing starting point for ELSS.” Additionally, starting an ELSS systematic investing plan after April 1 is a good idea if you want to create a large corpus over time. According to Vijai Mantri, co-founder and chief investment strategist at JRL Money, “it will also decrease timing risk.”
After evaluating your insurance needs, you can get a term life insurance policy if you do not currently have life insurance.
Remember to purchase insurance (Section 80D)
Tax preparation | You can claim up to Rs 25,000 in health insurance premiums for yourself, your spouse, and your children under Section 80D. You can get an extra Rs 25,000 per year if you buy health insurance for your parents. If the insured person is over the age of 65, he or she is entitled to twice the sum (Rs 50,000) for self, family, and parents (for a total of Rs 1 lakh) per year.
Many people rely on health insurance provided by their work. This protection vanishes when people shift occupations. As a result, it makes sense to get health insurance for your family on your own. “Purchase health insurance for a sum assured that fulfils your needs while remaining inside your budget. “Affordability is also important since you have to pay premiums year after year,” Maheshwari says.
If you’ve received a preventative medical exam within the last fiscal year. Section 80D allows you to claim up to Rs 5,000 in expenses.
a few pointers
“Don’t put off making your payment until the last few days of the month. If your check is not credited before the fiscal year’s conclusion. According to Mathpal, “the investment will not be counted in the current fiscal year.”
Examine the performance of any ELSS you’ve already purchased. You can supplement it even if it’s a mediocre performance. You are not obligated to invest in the champion from the previous year. “The bulk of well-managed schemes’ performance converges over time,” Mantri explains.
Look back on earlier investments for inspiration if you don’t have any money to invest this year. If you have some older ELSS units that are no longer locked in, for example. To claim the deduction, you can sell them and reinvest the proceeds in the same programme.
More importantly, once you’ve finished this year’s tax preparation, develop a strategy for next year and start putting it into action right away.