If you have chosen the old, with-exemptions tax regime and have not made your tax-saver investments yet, you have no time to lose. March 31 – the last date to complete the exercise for the financial year 2023-24 – is less than two months away.
If you are a salaried employee and have missed the deadline for filing investment declaration set by your employer, you can still make these investments, but there will be a price to pay. In such cases, your employer would have deducted excess tax while computing your taxable income for the financial year 2023-24. While you can claim tax refund on this excess tax deducted when you file your returns in July, it is a hassle best avoided.
In fact, all tax-payers would be better off commencing their tax-saving exercise well in advance, preferably in April, right at the beginning of the financial year. An early start can help you avoid last-minute glitches and hurried investment decisions.
A proactive approach will ensure that your tax-planning is not an isolated activity, but is integrated into your overall goal-based financial planning strategy.
Also read: New tax return forms for FY 2023-24 seek more details of tax deductions to eliminate false claims
To understand the do’s and don’ts of tax planning – particularly at the last minute – Moneycontrol’s Preeti Kulkarni spoke to Nisreen Mamaji, Founder, MoneyWorks Financial Services. Here are the key takeaways from the discussion:
- It is always better to start tax planning exercise in April – beginning of the financial year – to make the most of tax-saving benefits on offer under sections 80C, 80D (health insurance premiums) and so on.
- This will ensure that you have more time to do your research and choose investment avenues after carefully evaluating them on parameters such as risk-reward, liquidity and lock-in period.
- You can invest systematically through the year if you start in April, ensuring minimal burden on your cashflows. Investing at one go in March could mean constricted cashflows in the last month of the financial year.
- For instance, you can start systematic investment plan (SIP) into equity-linked saving schemes (ELSS) in April instead of investing a lump-sum in February or March. This will help you effectively navigate market volatility during the year.
- However, there’s no need to panic even if you haven’t made any tax-saver investments so far. But first, check the shortfall in the Rs 1.5-lakh limit under section 80C that you need to bridge.
- Take into account your employees provident fund (EPF) contribution, life insurance premiums and children’s tuition fee paid during the year before you make fresh 80C investments.
- Next, you can choose from a host of 80C instruments such as ELSS funds, public provident fund (PPF), national savings certificates (NSC), senior citizen savings scheme (SCSS) if you are senior citizen and so on.
- ELSS funds come with shortest lock-in period of three years. Although the returns are market-linked and hence risk tolerance needed is higher, they can help build wealth and boost your retirement corpus if you stay invested over the long-term.
- Ascertain your short-term and long-term goals, risk tolerance and investment horizon before you commit to long-term products. Such instruments cannot be liquidated should the need arises in times of emergencies.
- Do not wait until March 31 to complete the process as technical glitches on investment portals could derail your plans at the last minute.
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