Income tax planning — 5 tips to do it before March 31

Experts suggest individuals avoid taking a piecemeal approach while making tax-saving investments. Instead, they should align investments with long-term financial goals to derive the dual benefit of tax saving and wealth creation.

Salaried people should further identify which tax regime is good for them (the old one or the new one). For better tax management, investors should calculate their tax liability under both tax regimes and opt for one involving the least tax outgo.

Budget 2020 introduced a new tax regime with a lower tax rate in the interest of those unable to avail of benefits under the older tax regime. However, this regime is optional.

The residual tax liability can be saved through various voluntary investments or payments eligible for tax deduction under various sections of the Income Tax Act. These include investments in ELSS, NPS, ULIPs, VPF, PPF and other small savings schemes qualifying for Section 80C deduction, an additional deduction for investments of up to Rs 50,000 in NPS under Section 80CCD (1B), deduction under Section 80GG for those living on rent but not receiving HRA, availing HRA exemption by paying rent to parents under Section 10(13A), etc.

While making an investment, many people forget to check its rate of return.

So, while making the investment in these, experts suggest that an individual must check whether their returns are quite enough if they are compared with the return on other investments.