Income Tax planning is essential to financial planning because everyone on a salary is liable to pay taxes. Understanding both tax systems, maximizing deductions, and exploring investment options can reduce the tax outlay. As 2023 draws to a close, we’ll take a look at how to plan your taxes and why it’s important
Here are some tax tips to get you on track for 2024
If you haven’t yet had a chance to understand both systems (new tax regime, old tax regime), now is a good time to see which one would work best for you.
If you have income up to ₹7 lakh then the new tax system is better, because there is no tax up to ₹7 lakh and in addition, there is a standard deduction of ₹50,000 in the new tax regime. According to the changes proposed in the Union Budget 2023, no tax would be levied on people with annual income up to ₹7 lakh under the new tax regime but has not made any changes for those who continue in the old regime which provides for tax exemptions and deductions on investments and expenses like HRA.
“Though you have the option to switch to a more favorable regime when your ITR is filed, you’d better learn how to manage taxes easily, so that the TDS takes care of your tax outlay based on whichever regime is beneficial to you. ,” said Archit Gupta, Founder, and CEO, Clear.
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The old tax system that comes with exemptions on certain investments and expenses will still be attractive to taxpayers who pay house rent or have a home loan.
Archit Gupta said that individuals opting for the old regime should make efforts to maximize Section 80C deduction where total taxable income can be reduced by ₹1.5 lakh.
There are many options available based on your risk profile and time frame to invest. Many taxpayers opting for the old Section 80C regime do not maximize and thus pay some additional tax, Gupta said.
3) Tax removal
Stock markets have been volatile lately, and this can turn into a huge opportunity for income tax paying investors. They can reduce their income tax outlay by taking a loss.
“It would help to review your tax liabilities for capital gains tax, and see if there is a possibility of lowering your tax outlay by deducting tax from your gains,” said Archit Gupta.
4) Job change
A person’s tax liability is determined based on the aggregate income earned during the year from all sources taken together.
“If you changed jobs during the year, inform your former employer to share your wages and tax calculation that must be submitted to your second employer, for a proper tax calculation and to avoid the situation where you pay a higher tax when you file. for ITR,” said Archit Gupta.
Disclaimer: The opinions and recommendations made above are the opinions of individual analysts, and not those of Mint. We encourage investors to check with certified experts before making any investment decision.
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Updated: 21 November 2023, 02:23 PM IST
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