Through strategic investment, taxpayers can save a lot of hard-earned money while still meeting compliance. Strategic investment decisions can be proven useful tools for tax harvesting, and knowing when to apply them holds utmost importance. Taxpayers whose income is higher than the basic exemption limit are liable to pay taxes at the applicable rates. When taxes are not optimized and used proficiently, they can burn the pockets of the taxpayers. Tax avoidance attracts gst penalties and offenses, however, the government offers several optimization and tax-saving options to the citizens so that they can keep more of what they have earned. If you are looking to make strategic investments and seeking professional guidance, you must reach out to seasoned experts who can offer you a customized approach to tax-saving plans.
How to Make a Strategic Investment
Strategic investments not only free you from extensive tax liabilities but also provide you with huge investment returns so that you can opt to retire easily without worrying much about finances. Though a piece of separate advice would work optimally for each individual, here in the article, we will discuss the most common ones that possibly work for everyone in today’s times.
Tax harvesting
The tax harvesting is all about selling poor-performing investments and settling the losses with the gains made over the years. Selling the assets that have lost value and realizing capital loss from such investment is one of the most effective ways to reduce the overall tax liability in a fiscal year. The losses incurred could be set off against the gains made.
For example, Mr A has made a profit of Rs 1 lakh from a stock and a loss of Rs 50k from another stock. He or she can adjust the loss with the profit and therefore reduce the overall tax liability.
Holding Assets for a Longer Period
The capital gains tax in India depends on the holding period, and the assets could be held for short-term or long-term. The profits accrued from assets held for the short term are called short-term capital gains, and the profits accrued from assets held for the long term are called long-term capital gains.
The STCG is taxed at the rate of 15% while the LTCG is taxed at the rate of 12.5% without indexation. Exemption are available up to Rs 1,25,000.
Through Deductions and Exemptions
The Tax Authorities offer various deductions and exemptions to Indian taxpayers. They can use these deductions and exemptions to reduce the overall tax liability and make strategic investment decisions. Tax saving and strategic investments go hand in hand. When tax savings increase, taxpayers can make strategic investments for optimum returns. Under the Income Tax Act, several sections like 80C to 80U deal with the deductions and exemptions on taxable income.
Under section 80C, taxpayers can claim up to Rs 1.5 lakhs on investment in assets like PPF, NSC, ELSS, etc. While u/s 80D, you can claim up to Rs 1 lakh on medical insurance premiums. The benefits differ for senior citizens, can they can claim more under section 80D.
Rebated under section 87A is also one of the options to reduce the overall tax liability, and taxpayer can strategically make such decisions that can reduce the total taxable income.
Tax Planning for Start-Ups and Businesses
Start-ups are offered full tax exemption for three consecutive years since the year of incorporation. Section 80IAC of the Income Tax Act deals with the exemptions available for start-ups.
Established and new businesses can avail of further increased benefits under section 115baa, 115BAB, and more to save tax and optimize their income. There are other provisions available so that taxpayers, whether individuals, start-ups, or businesses, can reduce their overall tax liability. To get the optimum results, reach out to professionals and let them come up with a unique plan to meet your unique needs. Get started with TaxDunia and allow the experts to handle your taxes while you can focus on the business, hassle-free.