Tax Saving Options: Look For The Best Fit

There are various tax-saving options available in the market for those who are sticking to the old tax regime. But your best bets are the ones that find a place in your overall financial plan. We have strategies to help you choose the tax regime and the products that are right for you

- Meghna Maiti

Nothing is certain except death and taxes, but fortunately when it comes to the latter, there is a fair bit of planning that can be done to ease the burden.

If you are among those who have already done the calculations and decided to stay with the new tax regime, which was first proposed in 2020, you may not have much to worry about. You could simply continue with your financial plan. But if you are someone who has stayed in the new tax regime without giving it any thought-Union Minister of Finance Nirmala Sitharaman made it the default tax regime from FY2024-then you need to evaluate your options well.

If you are among those who find the old tax regime more beneficial because of the deductions and benefits it offers, you still need to plan carefully to ensure that the tax planning exercise fits into your overall investment portfolio. We give a list of the most efficient tax-saving instruments, and the rationale of investing in them.

The one that fits your needs will be the best choice for you.

CHOOSE THE REGIME

The first step to tax planning is deciding which tax regime is suitable for you if you haven't already done so. You can only do this by comparing how much tax you are liable to pay under each of the tax regimes-new and old.

Despite the attractiveness of the new tax system after Budget 2023, the old regime remains beneficial for many. Says Abhishek Soni, CEO, Tax2Win, an income tax portal: "If your total eligible deductions and exemptions in the old regime are higher than the breakeven threshold of deductions, for your income level, then stick with the old regime. If the breakeven threshold is higher than your total eligible deductions and exemptions, the new regime may be more beneficial for you." To figure out what works for you, see Choosing Between Tax Regimes.