As the financial year 2024-25 comes to a close, taxpayers have only 31 days left to finalize their tax-saving plans. If you haven’t yet made arrangements for tax savings, now is the time to act. Post-March 31, any attempts to save on your salary tax will be futile. In this article, we will explore various tax-saving strategies you can implement before the deadline, as well as the differences between the old and new tax regimes in India.
Understanding the Old and New Tax Regimes
The Indian government has provided taxpayers with a choice between two tax regimes: the Old Tax Regime and the New Tax Regime. The Old Tax Regime offers several deductions that can significantly reduce taxable income, including exemptions on investments in specific financial products. Conversely, the New Tax Regime features lower tax slabs but eliminates most deductions and exemptions.
Key Differences Between the Tax Regimes
| Feature | Old Tax Regime | New Tax Regime |
|---|---|---|
| Tax Slabs | Higher, with multiple existing deductions | Lower, few or no deductions |
| Key Deductions | Sections 80C, 80D, 80E, 80G, etc. | Limited to standard deduction only |
| Flexibility | More investment options | Less flexibility in investment |
Effective Tax-Saving Strategies
Under Section 80C, taxpayers can claim deductions of up to ₹1.5 lakhs. This section includes various investment avenues such as Public Provident Fund (PPF) and Equity Linked Saving Scheme (ELSS), both of which offer tax-free returns.
Life Insurance and Health Insurance Deductions
Another avenue for tax savings is through life insurance premiums, which can also be claimed under Section 80C. Additionally, if you are a parent, you can invest in the Sukanya Samriddhi Yojana for your daughter, thereby securing her financial future and enjoying tax benefits.
Moreover, under Section 80D, health insurance premiums can earn you deductions of up to ₹25,000, providing additional financial relief.
Home Loan Tax Benefits
If you have taken a home loan, you can claim a tax deduction of up to ₹2 lakhs on interest payments under Section 24B. Furthermore, if you are repaying an education loan, Section 80E allows you to deduct interest payments for higher education loans.
Additionally, contributions to the National Pension System (NPS) can garner an extra deduction of ₹50,000 under Section 80CCD(1B), which is separate from the ₹1.5 lakh limit of Section 80C.
Tax Benefits for Renters
If you live in a rented property and receive a House Rent Allowance (HRA) from your employer, you can claim deductions on this amount as well. Furthermore, donations made under Section 80G can grant deductions ranging from 50% to 100% of the donated amount.
With the March 31 deadline fast approaching, it is critical to plan your taxes wisely to maximize your deductions. Avoid hasty or poor investment decisions, and prioritize your financial security as you navigate the options available to you.