5 Tax Planning Actions You Need to Take Before the Year Ends – Money News

Tax planning helps you analyze your financial position and find ways to reduce your net taxable income and total tax output using various provisions available under the Income Tax Act, 1961. It becomes even more important to review your tax planning regularly because the government makes frequent changes to income. fiscal rules either during the Union Budget announcements or at other times.

Correct fee planning not only helps you manage your fiscal expenses, but also allows you to meet both your short-term and long-term financial goals. Remember, tax planning is not a one-time activity; it is an ongoing process as long as your income remains stable and taxable.

Now, as the year draws to a close, is the perfect time to reassess your financial position and optimize your tax obligations.

Niyati Shah, Vertical Head – Personal Tax at 1 Finance, points out that “tax planning is not just about saving tax – it’s about creating a roadmap for financial efficiency and long-term security. With the right strategies, you can significantly reduce your tax burden while aligning your savings and investments with your financial goals.”

Here are five essential tax planning actions to help you make the most of your hard-earned profit money:

Tax collection

Tax harvesting involves selling securities at a loss to offset taxable gains. Investors can strategically book Long Term Capital Gains (LTCG) up to Rs 1.25 lakh annually as it remains tax exempt under Section 112A of the Income Tax Act, 1961. Further, losses can be carried forward to offset future earnings. By selling and reinvesting, you can reduce future tax liabilities without affecting your overall investment portfolio.

Donations with tax advantages

Donating to society not only creates a positive impact, but also provides tax benefits. As Ms Shah points out, “donations made to charities registered under section 80G of the Income Tax Act, 1961 provide deductions of up to 100% or 50%, depending on the organization.” Make sure you keep your receipts and confirm your charity’s eligibility for tax benefits.

Retirement planning with tax deductions

Secure your retirement while saving on taxes. Investments in the National Pension system (NPS) allow additional deductions of up to INR 50,000 under section 80CCD(1B), over and above the limit of Rs 1.5 lakh under section 80C. Employer contributions to the SNP also provide for deductions – up to 10% of basic salary in the old regime and up to 14% in the new regime.

Health insurance: A win-win strategy

Health insurance isn’t just a shield against unexpected medical expenses; it also comes with tax benefits. Ms. Shah notes, “Premiums paid for you, your family and your parents are deductible under Section 80D up to INR 1,00,000. This benefit also covers preventive health check-up expenses up to INR 5,000.” It’s financial protection with a tax saving bonus.

LTA (Leave Travel allowance)

Traveling can be a joy and a tax saving opportunity. Under section 10(5) of the Income-tax Act, 1961, employees can claim tax relief for domestic travel expenses for themselves and their families during approved leaves. Proper documentation is required to avail this benefit.

Conclusion

Shah concludes by saying, “tax planning doesn’t have to be complex or cutting-edge. By implementing strategies such as tax collection, structured savings and smart investments and by evaluating the regime that is beneficial to you, it allows for the reduction of tax outflows and stimulates financial growth.” A proactive approach turns taxes from an annual burden into an opportunity to build wealth and secure financial freedom.