Why Tax Planning is Crucial

Tax planning is not about evading taxes; it's about using the provisions of the law to reduce your tax liability in a legal and efficient manner. For a salaried employee, this means making specific investments and claiming eligible expenses to lower your taxable income. Effective tax planning can save you tens of thousands, or even lakhs, of rupees every year, which can then be invested to grow your wealth.

Old vs. New Tax Regime: Which One to Choose?

For the financial year 2024-25, you can choose between two tax regimes.

• New Tax Regime: This is the default regime. It offers lower tax slab rates but does not allow you to claim most of the common deductions (like 80C, 80D, HRA).
• Old Tax Regime: This has higher tax slab rates but allows you to claim a wide range of deductions.

Which one is better for you? If you make significant investments in tax-saving instruments (like EPF, PPF, ELSS, NPS) and have a home loan, the Old Regime is often more beneficial. If you don't make these investments, the New Regime might result in lower tax.

Key Deductions Under the Old Tax Regime

1. Section 80C (Up to ₹1.5 lakh): This is the most popular section. Your contributions to the following can be claimed:

   • Employee Provident Fund (EPF)
   • Public Provident Fund (PPF)
   • Equity Linked Savings Scheme (ELSS) Mutual Funds
   • Life Insurance Premiums
   • Home Loan Principal Repayment
   • Tuition fees for up to two children

2. Section 80D (Health Insurance): You can claim a deduction for health insurance premiums paid for yourself, your family, and your parents.

   • Up to ₹25,000 for self, spouse, and children.
   • An additional ₹25,000 for parents (or ₹50,000 if they are senior citizens).

3. House Rent Allowance (HRA): If you live in a rented house and receive HRA as part of your salary, you can claim an exemption on it.

4. National Pension System (NPS) - Section 80CCD(1B): You can claim an additional deduction of up to ₹50,000 by investing in NPS. This is over and above the ₹1.5 lakh limit of Section 80C.

5. Home Loan Interest (Section 24): You can claim a deduction of up to ₹2 lakh on the interest paid on your home loan.

Simple Tax-Saving Strategy

• Max out your 80C limit (your EPF contribution already covers part of this).
• Invest ₹50,000 in NPS to save extra tax.
• Buy health insurance for yourself and your parents.
• If eligible, claim HRA and home loan interest benefits.

👉 Soon, we’ll be launching a comprehensive Income Tax Calculator to help you compare both regimes and simplify your tax planning. Stay tuned!