Now is the time to start planning for new financial year
We have entered in the new financial year and most of the salaried individuals would be waiting fortheir appraisal letters. Along with increment in your salary in the new financial year, your expanses like child’s education fees and house rent might increase as well. Those who are salaried employees will be asked to submit investment declaration by their HR in next few days. This is the high time to do your financial planning or reviewing your plan if you have the one with you.
Construct you household budget
For peace in life it is important to have good balance between you r income and expenses. You must construct your household budget and follow it judicially to manage your monthly cash flow. What you want to save for you financial goals should be considered as part of your monthly expanses. If you think that you will invest what is left after you spend then your entire salary will go in expenses and you will hardy left with anything to invest.
House Rent allowance can be tax free income
Salaried individuals what they get as HRA can be tax free if they are living in a rented house. Your employer will ask you for a rental agreement and rent receipt. If you have not registered the agreement yet then this is the high time to complete the process. As far as possible pay the rent by cheque or transfer the moneydirectly in the bank account of your landlord. Cash transactions encourage black money.
Invest to save tax
You can save tax by investing in various investment schemes under different sections of the income tax act as mentioned below.
U/s 80C of IT act
Though you have too many choices of schemes whereyou can invest to save tax but all of them may not be in accordance with your financial goals.You can claim deduction upto Rs. 1.50 lakh by investing in notified schemes u/s 80 C of income tax act but it is important to select the scheme that will help you achieving your financial goal. If you have a girl child below 10 years of age then SukanyaSamraddhi Scheme can be a good choice for you. You get tax benefit on investment as well as returns are tax free. Government will declare rate of interest on this scheme time to time but for financial year 2015-16 the same has been fixed at 9.20%. If you want to invest from long term perspective then PPF is also one choice for you. Buying life insurance policy can help you saving tax but it’s a poor choice of investment and it lacks opportunity to create wealth in long term. Buy only a term insurance plan if your family members are financially depended on you. If you are planning to save for your retirement then investing in retirement schemes of mutual fund can be the best choice for you. Apart from retirement scheme of mutual fund you also have choice to invest in Equity Linked Saving Schemes (ELSS) of Mutual Fund. You can not only expect good returns from ELSS in long term but also the return is tax free.
U/s 80CCD of IT Act
After you exhaust of IT Actyou limit of investment u/s 80 C of IT act then you have choice to invest additional Rs. 50000 in National Pension System (NPS) under section 80 CCD of IT act. The scheme is available at post office, designation branches of public sector banks and some other financial service companies.
U/s 80D of IT Act
You can claim deduction on the premium you pay towards your health insurance policies. The limit for claiming deduction u/s 80D of IT act is Rs.25000 for the policy you by for you, your wife and children. You can claim additional deduction up to Rs.25000 for the policy you buy on the life of your parents. For senior citizens the limit is Rs.30000. For instance, If you are below 60 years of age and you pay premium of Rs.25000 for a policy covering you, your wife and children and additional Rs.25000 for another health insurance policy you buy for your parents who are not senior citizens. You can claim deduction of Rs.50000 (25000+ 25000). But in another example if you are below 60 years of age but your either of the parents or both of them are above 60 years of age then you canclaim total deduction up to Rs.55000 (25000+30000). In a rare example where taxpayer himself is a senior citizen, paying premium of Rs.30000 form himself and additional Rs.30000 for his parents’ health insurance policy, can claim deduction upto Rs.60000.
Update your financial records
Ensure that your contact details are updated in the records of all your investment scheme, ration card, aadhaar card, passport etc. Many a time it has been observed that the nomination in the life insurance policy has not been updated even if the existing nominee has already died. Negligence may lead to problems in future. If you have sold any vehicle then ensure that buyer has transferred it in their name. Ignoring this may invite a big trouble.
