Income tax: Four money-saving tips to get on track for 2024

 

Income Tax planning is essential for financial planning as every salaried individual is liable to pay taxes. Understanding the two tax regimes, maximising deductions, and exploring investment options can help reduce tax outgo. With the year 2023 heading toward the end, let's understand how to plan your taxes and why is it important

Here are some tax tips to get on track for 2024

1) New vs old income tax regime

If you still haven't had a chance to understand the two regimes (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 regime is better, as there is no tax up to ₹7 lakh and additionally, there is a standard deduction of ₹50,000 in the new tax regime. As per the changes proposed in Union Budget 2023, no tax would be levied on people with annual income of up to ₹7 lakh under the new tax regime but it made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.

If you have income up to ₹7 lakh then the new tax regime is better, as there is no tax up to ₹7 lakh and additionally, there is a standard deduction of ₹50,000 in the new tax regime. As per the changes proposed in Union Budget 2023, no tax would be levied on people with annual income of up to ₹7 lakh under the new tax regime but it made no changes for those who continue in the old regime that provides for tax exemptions and deductions on investments and expenses such as HRA.

There are many options available based on your risk profile and your time horizon to invest. Many taxpayers who opt for the old regime don't maximise Section 80C and hence end up paying some extra tax, Gupta added.

3) Tax harvesting

Stock markets have been volatile lately, and this can be turned into a big opportunity for investors who pay income tax. They can reduce their income tax outgo through loss harvesting. 

“It would help to review your tax dues concerning capital gains tax, and see if there is a possibility to lower tax outgo via tax harvesting your gains," said Archit Gupta.

4) Job change

The tax liability of a person is determined based on the aggregate income earned during the year from all the sources taken together. “If you have switched jobs during the year, intimate your previous employer to share your pay and tax calculation which must be submitted to your second employer, for proper tax calculation and to avoid the scenario where you may end up paying a higher tax while filing your ITR," said Archit Gupta.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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