Smart Tax Planning

Make the tax planning exercise a year-long affair if you want to make the most of it, instead of rushing last minute

There is something unnerving about tax planning, which causes the smartest of people to not make it work in the most optimum way for them. People tend to address tax savings in isolation instead of aligning it with their financial goals. By doing so, they miss out on extracting the maximum from the tax savings options available to them. However, this year things will be different given the many changes in tax rules that could help you plan your taxes than cut the chase to previous quarter.

New rules

Before embarking on tax savings, understand the new tax slabs. First, the 10 per cent tax slab does not exist any longer. Henceforth, for those with income between ₹2.5 lakh and ₹5 lakh, the tax rate applicable will be 5 per cent. This will result in tax savings of up to ₹12,500 per year for all tax payers. One hand takes what the other gives—the tax rebate has been reduced to ₹2,500 from the earlier ₹5,000 per year for taxpayers with income up to ₹3.5 lakh. The combined effect of these changes in tax rate and rebate of taxpayers with taxable income up to ₹3.5 lakh will now be ₹2,575 instead of the earlier ₹5,150.