As the new financial year beckons upon us, we couldn’t help but wonder about the right financial advice that’ll enable us to handle money, smartly. Usually, as the final date for paying your annual tax approaches, we tend to get lost in the whirlwind of balance sheets and the raging vortex of numbers.
We always wonder, “Oh, If only I had managed my finances better, earlier.” Well, better late than never. With no impending deadlines, this is the perfect time to not only receive the right financial advice pertaining to taxes but to start implementing it as well.
Hence, we sat down with an experienced C.A and garnered the tips below:
- Monitor your expenses regularly and keep a tab on your multiple sources of income. This will help you understand the nature of your expenditure.
- Apply the rule of ensuring that 40% of your income goes towards savings/savings fund. This will become a financial backbone for you.
- Have a good tax advisor who will understand your financial journey and will help you manage your finances better.
- Invest in good medical insurance. Apart from cushioning you from life’s unpredictability, it will help you from a taxation purview as well. As it’ll enable you to receive a deduction of Rs 25,000 from the medical insurance premium that you pay. If you pay for your parents/dependents’ insurance, you can receive a deduction of Rs 50,000.
- In fact, you are eligible for receiving deductions from various expenses and investments under section 80C. Be it life insurance premium, Provident Fund Contribution, tax-saving mutual funds which have a lock-in period of 3 years, investment in a P.P.F for over 5 years, or several other contributions, you can reduce your tax liability up to Rs 1,50,000. Cumulatively, that is the set amount.
- Education loans can also help you save under Section 80E. Whether you apply for an education loan for studying in India or abroad, the interest paid on the loan is allowed to be calculated as a deduction. When it comes to tax-saving benefits of this, it can be an education loan you have taken to support yourself or any person you are a legal guardian of. But do note, that this can be accounted for, once you start repaying the loan.
- Please take into account if you’ve made any donations to charitable institutions. Do keep the receipts of the same, as they can help you in 50% or 100% tax exemption based on certain factors like the type of donation and the registration of the organization.
- Do pay the minimum balance to ensure the continuity of your PF, NPS, or any other tax-saving scheme.
- Another way of reducing capital gains tax is by employing the tax-loss harvesting strategy. It means to sell your securities when it comes to mutual fund investments at a loss in order to offset the capital gains tax due.
- HRA is one aspect most people ignore. Basically, if House Rent Allowance (HRA) is a component of your salary, then you can save tax on the rent paid. Hence, it is extremely important to ensure you have a detailed rent agreement with valid proof.
These are some of the ways in which you can be astute when it comes to handling your personal finances. And what better time to incorporate this than now, at the beginning of the new financial year!