Revenue Given that everyone with a salary is required to pay taxes, tax preparation is a crucial component of financial planning. Tax outgo can be decreased by being aware of the two tax regimes, maximizing deductions, and looking into investment possibilities. Considering that 2023 is almost over, let’s discuss tax planning and why it’s crucial.
Now is a good time to determine which of the two tax regimes—the old tax system and the new tax regime—would be best for you if you haven’t gotten a chance to learn about them yet.
The new tax regime is preferable if your income is up to ₹7 lakh because there is no tax on incomes up to that amount and a ₹50,000 standard deduction is included. According to the planned revisions in the Union Budget 2023, individuals earning up to ₹7 lakh a year will not be subject to tax under the new tax system. However, this does not affect those who continue to pay taxes under the previous regime, which offers tax exemptions and deductions for investments and costs like HRA.
It is preferable to learn how to manage taxes simply so that TDS can take care of your tax outflow based on whichever regime is advantageous to you, even though you have the opportunity to move to a more advantageous regime while filing your ITR.
For taxpayers who have a home loan or pay rent, the previous tax system that offers exemptions on specific investments and expenses will continue to be appealing.
If you choose the previous system, you should try to maximize your Section 80C deduction, which can cut your total taxable income by ₹1.5 lakh.
Depending on your investment horizon and risk tolerance, there are a plethora of possibilities. Many taxpayers who choose the previous system fail to take full advantage of Section 80C, which results in additional tax being paid.
The recent volatility of the stock market presents a significant opportunity for income-tax-paying investors. They can use loss harvesting to lower their income tax liability.
Reviewing your capital gains tax obligations and determining whether you can reduce your tax liability by tax harvesting your gains could be beneficial.
A person’s tax burden is calculated using their total income from all sources earned throughout the course of the year.
If you changed jobs during the year, let your former employer know so they can provide your pay and tax computation to your new employer. This will ensure appropriate tax calculation and prevent you from paying more tax when filing your ITR.
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