Four smart ways to save on taxes
Proper tax planning can not only help you save on taxes, but also increase your income. We all want to know how and where to invest to maximise our return on the investments, but make some obvious mistakes such as keeping tax planning for the last minute. Experts say people make impulsive investment decisions last-minute. Here are a few smart strategies that help you maximise your investment returns.
Start tax planning at beginning of the financial year
This is a very crucial step to maximise the returns on your investment. Anup Bansal, chief investment officer, Scripbox says, “Tax planning is a crucial aspect when it comes to saving on returns. If one starts at the beginning of the financial year it provides more time to select instruments as per one’s goals and preferences.” Also, it helps you avoid last-minute impulsive investment decisions.
Additionally, if you are planning to make investments in tax-saving instruments like ELSS and PPF, experts say it is best to do it at the beginning of the year to give more time for growth. If there are changes in your personal situation, such as rental agreement changes (HRA) then take these into consideration and intimate your employer for accurate TDS.
Financial gifts to parents
To avoid income clubbing, you can make financial gifts to your parents, or even your grandparents. Bansal says, “If a parents are over the age of 65 and do not have a taxable income, the taxpayer can invest in their name to earn tax-free interest.” Senior citizens over the age of 60 are entitled to a Rs 3 lakh baseline exemption. And if you wish to take the help of a senior citizen above the age of 80, the exemption is even higher at Rs 5 lakh.
Investing in the name of your kids
Investing in the name of your kids is a great idea as they help you save tax like your parents and grandparents.
“After becoming an adult, the kid will be treated as a separate individual, for tax purposes and would even be eligible to open a Demat account and invest in stocks and mutual funds, with money gifted by the parent,” says Bansal.
Long-term capital gains of up to Rs 1 lakh will be tax-free every year, while short-term capital gains would be tax-free up to the standard exemption of Rs 2.5 lakh per year.
Invest in NPS for tax benefits
India has low annuity rates, and the scary thought of putting away your retirement money forever, has led to NPS being considered an unattractive investment option. However, Bansal points out that NPS’s withdrawal regulations have seen recent reforms which have reversed this to some extent, making the pension scheme more appealing to those in their 50s. “The new rule opens a few different tax-saving options for investors,” he says.
Benefit from the available tax deductions. It is important to know where you can benefit from the available tax deductions. You can claim certain deductions up to Rs 1.5 lakh under Section 80C. Even for investing in NPS, you get a deduction up to Rs 50,000 under Section 80CCD(1b).
Source: financialexpres
