With the beginning of new financial year 2022-23, investors and income taxpayers are required to complete some important financial tasks that can maximise worth of one’s money and put its finances on an even keel for entire financial year. Submitting Form 15G and 15H to avoid TDS interest, income tax planning with the beginning of new financial year and giving VPF mandate to the employer are some of the important money-oriented tasks an earning individual needs to take care of right from the beginning of new financial year.
Here we list out 5 important money tasks that can put an earning individual’s money on an even keel for the entire financial year:
1] Raising investment with rise in income: After the beginning of new financial year, salaried individuals are expected to get higher monthly salary at the end of this month. So, an earning individual is advised to increase the quantum of its investment in sync with one’s increased income. For example, if an investor is investing in mutual funds SIP in monthly mode, then he or she is advised to increase one’s monthly SIP amount from next month.
2] Income tax planning: It is also advisable for taxpayers to give some time on their income tax planning because a penny saved is a penny earned. For example, if an investor is investing in tax saver plans, then he needs to make sure that it has exhausted all possible tax saver tools like Section 80C, 80CCD (1B). However, it is also advised to an investor that one should not invest in tax saver tool for mere sake on saving income tax outgo. One should look at the return one will get on one’s investment too. At least those those tools that has the capacity to beat average 5.5 to 6 per cent annual growth rate of inflation. So, opening a Public Provident Fund (PPF) account, National Pension System or NPS account or tax saver post office term deposit can be a good option.
3] Portfolio management: With the beginning of new financial year, one should look at one’s portfolio as well. If needed, one should re-balance one’s portfolio and maximise the worth of one’s money. For example, if someone is planning to start equity mutual funds SIP in new financial year, it’s better to look at ELSS mutual funds if there is some space left in one’s Section 80C exemption limit.
In long-term, ELSS mutual funds will give higher than debt funds and at the same time one would be able to save income tax outgo on one’s investment in ELSS funds on up to ₹1.50 investment in single financial year. If someone has higher risk appetite and he or she is in the nascent phase of one’s career, then one can go for ELSS mutual funds for long-term asset allocation. However, diversification of the portfolio is also important and portfolio management has to be done from this angle too.
4] Giving VPF mandate to one’s employer: Even though Provident Fund (PF) interest rate has been reduced to four-decade low of 8.10 per cent, it is still 1 per cent higher from PPF interest rate of 7.10 per cent. So, a salaried person should continue investing in voluntary provident fund (VPF) and give mandate to one’s employer to continue deducting VPF form one’s monthly income. It will help him exhaust Section 80C exemption limit and get highest possible return on a risk-free investment. However, one has to keep in mind that EPF contribution up to ₹2.5 per annum falls under EEE category. EPF interest earned beyond ₹2.5 lakh investment in taxable.
5] File form 15G and 15H to avoid TDS deduction: If an earning individual has an annual income below ₹2.50 lakh, then in that case one needs to submit Form 15G, if its age is below 60 years and avoid any TDS deduction on the interest earned on band deposits. Similarly, in the case of a senior citizen with annual income below ₹2.5 lakh, form 415H will be applicable for the same TDS deduction benefit.
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