Let’s take stock of the new tax norms and take a look at tax-saving options for the new financial year.
With the beginning of a new financial year, new income tax rules will kick in. These changes are not rocket science. They are fairly easy to follow. So let’s take stock of how these new rules will impact your money decisions, and what tax-saving options exist for you.
10% Tax on LTCG Gains
A move that dampened investor spirit, we heard the announcement of a 10% tax on Long-Term Capital Gains exceeding Rs. 1,00,000 on equity investments such as stocks and equity mutual funds. However, this new tax need not worry you. Most small investors can beat this rule by booking profits before they hit the Rs. 1,00,000 limit. Continue to invest in ELSS mutual funds, which not only help you save taxes up to Rs. 1.5 lakh under Section 80C, but also help you create wealth in the long term. Not just that, you can also consider investing in Unit Linked Insurance Plans (ULIPs) wherein your maturity benefit would be completely tax-free in your hands under Section 10(10D). Despite the new tax, equity continues to be more tax-efficient than many other forms of investment.
Standard Deduction Of Rs. 40,000
You’ll no longer need to collect medical bills to claim reimbursements. The earlier headers of conveyance (Rs. 19,200) and medical reimbursements (Rs. 15,000) have been scrapped. What you have now is one standard deduction of Rs. 40,000 that you get, no questions asked. How big a difference this makes to your take-home pay remains to be seen though.
More Tax-Free Interest Income For Senior Citizens
Interest income of up to Rs. 50,000 is now tax-exempt for senior citizens. The exemption for others remains the same at Rs. 10,000. For senior citizens, this provides a good incentive to buy more fixed income instruments such as bank deposits and Senior Citizen Savings Scheme.
Buy More Health Insurance For Senior Citizens
Senior citizens can now claim up to Rs. 50,000 in deductions under Section 80D for premiums paid towards health insurance. This is up from the earlier Rs. 30,000. This means that not only can senior citizens claim higher deductions, taxpayers who’re not above the age of 60 can also claim the same deduction by buying health insurance for their senior citizen parents.
As always, invest adequately towards 80C and 80D by buying a mix of life insurance, health insurance, PPF, ELSS, Sukanya Samriddhi, five-year deposits, and NSC as per your needs.
The writer is CEO, BankBazaar.com