Tax Planning for Salaried Individuals: November Checklist

As we approach the end of the year, it’s the perfect time to revisit your tax planning strategy. Many salaried individuals tend to leave tax planning to the last moment, but November offers a golden opportunity to make tax-saving moves before the year ends. In this blog, we’ll guide you through simple steps to optimize your tax savings and reduce your overall tax liability.

1. Review Your Income and TDS So Far

The first step in your tax planning journey is to review your income and the taxes already deducted.

• Check Your Salary Structure:
  Go through your salary slip to understand the different components:
• Basic salary
• House Rent Allowance (HRA)
• Special allowances
• Bonus/incentives
• Other benefits like medical reimbursements, transport allowance, etc.
• Tax Deducted at Source (TDS):
  Your employer typically deducts taxes from your salary every month. To check if your TDS is sufficient, verify it against your Form 26AS (available on the Income Tax Department’s website) or your monthly salary slip. If your TDS is less than your actual tax liability, you may need to pay the balance through advance tax payments.

2. Maximize Your Tax Deductions Before Year-End

India’s tax laws provide various opportunities to reduce your taxable income through deductions. Ensure that you’re taking full advantage of these before the year ends.

• Section 80C: Tax-Saving Investments (Limit of ₹1.5 lakh)
  You can save up to ₹1.5 lakh a year under Section 80C through several investment options:
• Public Provident Fund (PPF): A government-backed, safe investment option offering tax-free returns.
• Employee Provident Fund (EPF): Contributions to EPF qualify for deductions. You can increase your EPF contribution through Voluntary Provident Fund (VPF).
• National Savings Certificate (NSC): A government scheme that offers tax benefits along with guaranteed returns.
• Equity-Linked Savings Scheme (ELSS): Tax-saving mutual funds with a lock-in period of 3 years. These offer the potential for higher returns but come with higher risk.
• Life Insurance Premiums: Premiums paid for life insurance policies for yourself, your spouse, or children are eligible for deductions.

If you haven’t yet maxed out this ₹1.5 lakh limit, now is the time to do so!

• Section 80D: Health Insurance Premiums (Up to ₹25,000 or ₹50,000)
  Under Section 80D, you can claim deductions on health insurance premiums:
• ₹25,000 for yourself, your spouse, and children.
• ₹50,000 for senior citizens (if your parents are above 60 years old).
  Additionally, preventive health check-up expenses (up to ₹5,000) are also deductible under this section.
• Section 80E: Education Loan Interest
  If you’ve taken an education loan, you can claim a deduction on the interest paid on the loan, with no upper limit. This benefit is available for 8 years or until the interest is paid, whichever is earlier.
• Section 24(b): Home Loan Interest (Up to ₹2 lakh)
  If you have a home loan, the interest you pay on it can be deducted from your taxable income. For a self-occupied property, you can claim a deduction of up to ₹2 lakh per year.
• Section 80G: Charitable Donations
  Donations made to registered charitable organizations are eligible for tax deductions under Section 80G. The deduction can be 100% or 50% of the donation amount, depending on the charity. Ensure you have the donation receipt and that the charity is registered with the Income Tax Department.

3. Optimize Your Salary Components (HRA & LTA)

Certain salary components are tax-exempt or partially exempt. Make sure you’re making the most of these exemptions.

• House Rent Allowance (HRA):
  If you live in a rented house, HRA can help reduce your taxable income. The exemption amount depends on:
• Rent paid.
• The salary you receive.
• Whether you live in a metro city (Delhi, Mumbai, Chennai, Kolkata) or a non-metro city. Ensure you have valid rent receipts or a lease agreement to substantiate your HRA claim.
• Leave Travel Allowance (LTA):
  You can claim tax exemptions on the travel expenses incurred during a holiday within India. However, it only covers travel expenses and not accommodation or meals. LTA is valid only for two journeys in a block of four years, so check if you’ve taken advantage of this benefit in the current block (2022–2025).

4. Invest in NPS for Additional Tax Benefits

The National Pension Scheme (NPS) is an excellent way to save for retirement and reduce your taxable income. In addition to the ₹1.5 lakh limit under Section 80C, you can claim an extra deduction of ₹50,000 for contributions to NPS under Section 80CCD(1B).

NPS offers a mix of equity and debt investments and is backed by the government. The contributions are eligible for tax breaks, and the returns are taxed at the time of withdrawal.

5. Don’t Forget Tax-Saving Fixed Deposits & Other Instruments

• Tax-Saving Fixed Deposits (FDs):
  A 5-year tax-saving fixed deposit offers deductions under Section 80C, up to ₹1.5 lakh. Though the returns are taxable, it’s a secure option for those looking for fixed returns.
• Sukanya Samriddhi Yojana (SSY):
  If you have a daughter, consider investing in the Sukanya Samriddhi Yojana, a government-backed scheme that offers high interest and tax benefits under Section 80C. It’s a long-term investment aimed at securing your daughter’s future education and marriage expenses.

6. Check Your TDS and Advance Tax Payments

• TDS Adjustments:
  Ensure that the TDS deducted by your employer is aligned with your actual tax liability. If you have a salary increase or additional income (e.g., interest on savings, rental income), your TDS might need to be adjusted. If necessary, you can request your employer to update your TDS deductions.
• Advance Tax:
  If you have other sources of income (like freelance work or interest income), you may need to pay advance tax in instalments by 15th March 2024. This helps you avoid paying interest on delayed payments.

7. Common Mistakes to Avoid During Year-End Tax Planning

• Procrastinating Until December:
  The closer you get to the financial year-end, the more rushed and stressful tax planning becomes. Don’t wait till December to make decisions — start now to maximize your savings.
• Not Submitting Investment Proofs:
  Ensure that you submit all necessary investment proofs (e.g., PPF receipts, LIC premiums, EPF contribution statements) to your employer or the Income Tax Department well before the deadline. Missing this step can result in missing out on deductions.

Conclusion:

November is a great time to review your tax-saving strategies and make necessary adjustments. The good news is that there are plenty of ways to reduce your tax liability before the financial year ends. From maximizing deductions under Section 80C and 80D to taking advantage of salary benefits like HRA and LTA, you have several opportunities to save on taxes. Start early, stay organized, and take proactive steps to make sure you don’t miss out on any tax-saving opportunities.

Start reviewing your tax plan today! Ensure you’re making full use of available deductions, submitting the necessary documents, and maximizing your tax-saving investments before the financial year ends. If you’re unsure about anything, it’s always a good idea to consult with a tax expert to get personalized advice.