This article discusses Finance And Tax Planning For New financial Year. With the start of the 2022-23 Fiscal Year, the tax clock is beginning to recur. Therefore, you should also restart your financial and tax calculations. By taking into account changes in tax laws and prospects for improvement in your income.
After calculating your approximate annual income, you should consider all available tax deductions to reduce tax payments.
Although income slabs and rates remain unchanged in the new financial year, several tax-saving tools exist. Just make sure they fit snugly in your overall financial plan.
March 31 — the last day to make a tax-saving investment for the financial year — has recently passed. Generally, taxpayers rush to make such investments to obtain tax breaks under Section 80C of the Income Tax Act before the end of the financial year.
As the 2022-23 financial year begins on April 1, those with investment plans and tax savings in their minds should take the time to plan the various investment options available to achieve Finance And Tax Planning For New financial Year.
Submitting Form 15G and 15H to avoid TDS interest, setting up income tax at the beginning of the new financial year, and granting provident funds to the employer are essential tasks an investor needs to attend to from the beginning of the new financial year.
Since tax-saving investments are naturally long and come with some closing times, you should take the tools carefully so that, without tax savings, such devices should meet your long-term financial goals.
Money Resolutions For The Next Financial Year
Make a financial plan at the beginning of the fiscal year.
Start making the plan by creating a budget for yourself and your family’s requirements. Next, analyze your previous year’s income, expenses, and future goals. Go through your budget and financial plan and check if you have reached out max limit for the year. Then, start Planing spending and cash flows for the next financial year. If you have a purpose coming up this financial year, plan to gradually move your money from equity to debt and keep it safe. In case you have received handsome annual bonuses, prepay your expensive loans—if not entirely, at least partially. If you pay interest for debt more outstanding than returns on your investments, you should pay it off with the annual bonus and have efficient Finance And Tax Planning For New financial Year
Tax planning in the financial plan.
It is best to plan your finances for 2022-23 now instead of waiting until the end of the year to avoid mistakes. It’s better not to leave tax planning until the end of the financial year. Often investors become impatient when closer to the deadline. That’s most mistakes take place.
You can do SIPs in your ELSS fund at the beginning of the financial year or invest in PPF.
It should be a throughout-the-year activity as per your financial plan and goals.
Review your goals right at the beginning
Like your annual appraisal, it is essential to review your goals and the performance of various investments you have made every year. “In many cases, short-term goals you may have invested could become redundant. A review of plans at the beginning of the year will help you identify such investments and redirect them to longer-term goals, Tax & finance plan. It would also help to re-balance your investment portfolio according to your planned asset allocation.
Determine your insurance needs
Evaluate your insurance—life and health—right away, and not when submitting your investment proofs or before March 31. Insurance policies serve critical needs and should not be seen merely as tax-saving instruments in financial plan. Ascertain if your insurance covers are adequate. If not, enhance the coverage right now rather than waiting until March. As a thumb rule, your life insurance amount should be at least ten times your annual income. However, since you have time on hand, you would do well to take stock of your assets, goals, loans, and spouse’s income to arrive at an accurate figure. In the case of health insurance, a 40-year-old couple with two kids should start with health insurance of a minimum of Rs 10 lakh and review it every five years.
Do not be swayed by quick returns from cryptos.
Since its inception, cryptocurrencies have been in the news, especially after Budget 2022, which tax gains at 30 percent. Our message to customers who asked us whether to invest in cryptocurrency is simple. If you have the money you are willing to lose, that’s the kind of money you should allocate towards cryptocurrency. However, it’s a speculative investment and can only be a tiny percentage of your long-term portfolio and tax & finance plan.. With 30 percent taxation being introduced on gains from crypto, it only makes the task more challenging to generate returns while investing in cryptos. Check the latest news on crypto as of April 1, 2022.
Activities to have a stable financial position throughout the year.
Increasing investment with higher incomes:
Often, new investments bring happiness to employees and gain momentum at this time of year. Therefore, a person is advised to increase the investment value according to his salary increase. For example, if an investor invests in mutual funds SIP in monthly mode, then he may be able to increase his monthly SIP value.
Income tax planning:
This is the best time to do any income tax planning as finances begin. If you plan to invest in a tax deduction, you should research all tax-saving options to give you the best returns and tax savings. For example, if an investor is investing in tax-saving schemes, they should make sure that they have used all possible tax savings tools such as Section 80C, 80CCD (1B).
However, it is also essential that one should not invest in a tax-saving tool to save income tax. Instead, one should look at the return on investment and plan finances and consider those powerful instruments that strike 5.5 percent to 6 percent per annum in inflation. Therefore, opening a Public Provident Fund account, a National Pension Scheme account, or a tax office deposit time would be a good option.
Portfolio Management:
At the onset of the new financial year, one should also look at his portfolio. If necessary, one should re-evaluate the portfolio and increase the amount of money. For example, if someone plans to start an equity mutual funds SIP in the new financial year, it is best to look at ELSS mutual funds to provide tax benefits, as long as the taxpayer has not filled his investment limit Section 80 CIT Act.
Over time, ELSS mutual funds generally offer better benefits than loan funds.
Granting VPF authorization to an individual employer:
Although the EPF interest rate is reduced by 14% to 8.10 %, it is still one point above the PPF rate of 7.10 %. Therefore, the lead person should continue to invest in a voluntary provident fund. And authorize their employer to continue deducting VPF money from their monthly salary. It will help each complete the exemption limit in Section 80C and get the highest return on risk-free investments. However, remember that an EPF donation of up to Rs 2.5 lakh per year falls under the EEE category. EPF interest earned over Rs 2.5 lakh on tax investment. This is helpful in Finance And Tax Planning For New financial Year.
Submit forms 15G and 15H to avoid TDS capture:
If a person under the age of 60 has an annual income of less than Rs 2.50 lakh, they are authorized to submit a Form 15G to avoid any TDS interest on the deposit earned. Similarly, in the case of an adult citizen with an annual income of less than Rs 2.5 lakh, form 15H will apply to the same TDS retention benefit and plan your finance.
Tax savings investment options
PPF and FDs
The Public Provident Fund (PPF) and FD-savings FDs allow tax deductions up to Rs 1.50 lakh on the investment amount during the financial year.
NPS
The National Pension System (NPS) is a retirement planning plan to generate monthly income at retirement. Both government employees and private companies can use it.
SCSS
The Senior Citizens Saving Scheme (SCSS) was designed to provide general income for people over the age of 60, allowing for tax exemptions of up to Rs 1.50 lakh.
Life Insurance
Life Insurance offers tax benefits of up to Rs 1.50 lakh, while ULIP offers market-linked returns and insurance, finance and tax deductions.
Health insurance
Health Insurance allows you to save up to Rs 25,000 in regular income paid to you, your spouse, and your children, while up to Rs 50,000 if both parents are covered.
ELSS
The Equity Linked Savings Scheme (ELSS) is another excellent option for financial planning that allows you to invest in the stock market and save tax at the same time of the minimum closing period of 3 years.
Plan your taxes and finances before its too late. Good Luck
Thank you for Reading
Sukhpreet Kaur
