Tax tension? Dive into current fiscal with 13 expert steps for advance tax planning

Tax experts are suggesting individuals for an early start for tax planning in current financial year  to ensure maximum deductions, credits, and overall tax efficiency. A proactive approach can help individuals optimise their financial situation, take advantage of changing tax laws, and secure their financial future.

"Starting early allows you to research and learn about various tax-saving options thoroughly. You can align your financial goals with your tax-saving goals by making informed investment decisions. For instance, investing in an Equity Linked Savings Scheme (ELSS) at the beginning of the year not only saves income tax but also benefits from compounding, potentially generating higher returns in the long run," said Amit Gupta, MD, SAG Infotech.

"Early tax planning gives you the opportunity to restructure your salary and avail various tax exemptions. Components such as Leave Travel Allowance (LTA) or House Rent Allowance (HRA) can significantly reduce your income tax liability. Identifying these exemptions early on allows you to request your employer to restructure your salary accordingly," he added.

Tax-Planning steps according to SAG Infotech

Gather and organise documents

Collecting all the necessary documents, including investment statements, charitable donations, medical expenses, and business-related expenses, is crucial. Properly organising these records will set the foundation for a smooth tax planning process.

Reflect on previous year's return

Analysing your previous year's tax return provides valuable insights into income sources, deductions, and credits. Use this information as a reference point to strategise for the current fiscal year.

Estimate income

A key step is to estimate your income for 2024 from all sources. This includes wages, investments, rental properties, and any side endeavours. Estimating your income helps determine your tax bracket and potential deductions.

Stay informed about tax law changes

Staying up to date with any changes in tax laws is paramount. New regulations can impact tax credits, deductions, and other tax-related options. Regularly monitor changes to optimise your tax strategy.

Boost retirement contributions

Consider increasing contributions to retirement accounts like NPS and EPFO as these contributions not only lower taxable income but also provide a means to save for the future.

Explore deduction opportunities

Identify deductions you qualify for, such as mortgage interest, property taxes, student loan interest, medical expenses, and state/local taxes. Decide whether itemising deductions or taking the standard deduction is more advantageous.

Maintain detailed donation records

If you plan to make charitable donations, ensure proper record-keeping, as these donations may be tax deductible.

Assess investment strategies

Evaluate your investment portfolio to gauge potential gains or losses. Consider tax-efficient strategies to offset capital gains and minimise tax liabilities.

Account for business and self-employment

For business owners and freelancers, understanding business-related expenses and deductions is essential. Carefully review these aspects to optimise tax efficiency.

Plan estimated tax payments

Individuals with income that isn't subject to withholding (self-employment income) must calculate and pay estimated taxes quarterly to avoid penalties.

Consult tax professionals

Engaging a certified tax professional or accountant can provide personalised guidance. They offer tailored advice, assist in planning, and ensure adherence to tax regulations.

Leverage tax planning software

Utilise tax planning software to streamline financial organisation, calculate taxes, and analyse scenarios for optimal tax planning.

Continuous review and adjustments

Tax planning is an ongoing process. Regularly assess your financial situation and tax strategy throughout the year. Make the necessary adjustments based on changes in income, expenses, and tax laws.