Explore the current fiscal with 13 professional strategies for early tax planning
To secure the greatest possible deductions, credits, and overall tax efficiency, tax professionals advise individuals to begin their tax planning as early as possible in the current fiscal year. People can improve their financial condition, take advantage of shifting tax regulations, and ensure their financial future by taking a proactive attitude.
Starting early enables you to thoroughly explore and educate yourself on numerous tax-saving possibilities. By making wise investment decisions, you may balance your financial and tax-saving objectives. For instance, making an early-year investment in an Equity Linked Savings Scheme (ELSS) can potentially result in larger returns later on thanks to compounding as well as income tax savings.
Find Below some Tax-Saving Steps
Assemble and arrange your paperwork
It’s important to gather all the required paperwork, such as investment statements, tax returns, receipts for charitable contributions, medical bills, and business-related expenses. A smooth tax planning procedure will be enabled by properly organizing these records.
Review the return from the prior year
Examining your tax return from the prior year can give you important information about your income sources, tax credits, and deductions. When planning your strategy for the upcoming fiscal year, use this information as a guide.
A Projected Income
Estimating your total revenue for 2024 is a crucial step. This covers salaries, financial commitments, rental properties, and other side projects. Your tax bracket and potential deductions can be ascertained by estimating your income.
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 minimize 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 optimize 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.
(The writer, Amit Gupta, is the MD of Sag Infotech)