Tax Planning Overview
Effective tax planning helps you legally minimize your tax liability while maximizing savings. This guide covers key strategies for FY 2024-25 under both old and new tax regimes.
Understanding Tax Regimes
Old Tax Regime
- Multiple tax slabs with deductions
- Standard deduction of ₹50,000
- Various exemptions under Section 80C, 80D, etc.
- HRA and LTA exemptions available
New Tax Regime
- Lower tax rates
- Standard deduction of ₹75,000
- Limited deductions available
- No HRA or LTA exemptions
Key Tax Saving Investments
Section 80C Investments (₹1.5 lakh limit)
- ELSS Mutual Funds: 3-year lock-in, market-linked returns
- PPF: 15-year lock-in, tax-free returns
- NSC: 5-year lock-in, fixed returns
- Tax Saver FDs: 5-year lock-in, guaranteed returns
- Life Insurance: Premium up to 10% of sum assured
Section 80D - Health Insurance
- ₹25,000 for self and family
- Additional ₹25,000 for parents (₹50,000 if senior citizens)
- ₹5,000 for preventive health check-ups
Advanced Tax Planning Strategies
Salary Structuring
- Optimize HRA component
- Claim LTA for travel expenses
- Food coupons up to ₹2,200 per month
- Mobile and internet reimbursements
Investment Planning
- Systematic Investment Plans (SIPs)
- Diversified portfolio approach
- Long-term capital gains planning
- Tax-efficient mutual funds
Business Tax Planning
For Businesses
- Accelerated depreciation claims
- Research and development expenses
- Employee benefit schemes
- CSR expenditure planning
For Professionals
- Professional tax deductions
- Office rent and utilities
- Professional development expenses
- Equipment and software costs
Year-End Tax Planning
- Review and optimize investments
- Harvest tax losses in equity
- Plan bonus and incentive timing
- Prepay expenses where beneficial
Common Tax Planning Mistakes
- Last-minute investment decisions
- Ignoring inflation impact
- Not reviewing tax regime choice
- Overlooking documentation requirements
Conclusion
Effective tax planning requires a systematic approach and regular review. Start early in the financial year and seek professional advice for optimal results.