March 31 Deadline: Last-Minute Guide to Reduce Tax Burden

Only a few days are left to make tax-saving investments for the current financial year 2024-25. The upcoming FY 2025-26 is just 12 days away and individuals opting for the old tax regime should utilise these days to reduce their tax burden.

According to the finance ministry data, 72% of taxpayers shifted to the new tax regime in FY24 and the percentage is likely to increase. However, a section of taxpayers, still opt for the old tax regime to avail the benefits. Here is a guide to your last-minute tax planning:

 Understanding Section 80C

Section 80C allows taxpayers to claim deductions of upto Rs.1.5 lakh under certain investment schemes including the Sukanya Samriddhi Account (SSA), equity-linked saving schemes (ELSS) life insurance policies, Public Provident Fund (PPF), employees’ provident fund (EPF) and five-year tax-saver bank fixed deposits. You can opt for an investment that aligns with your long-term financial goals.

 Keep Copies of your Children’s Tuition Fees

Keep scanned copies of your children’s tuition fees paid during the year. You can claim deductions for school/college tuition fees paid for up to two children under section 80C. The maximum limit for the deduction is 1.5 lakh. Both spouses can claim this deduction separately. Suppose the tuition fee paid is Rs. 2 lakh, the wife can claim deductions of upto 1.5 lakh and the husband can use the remaining Rs. 50,000. However, it should be noted that the school bus fees, donations, charges for extra-curricular activities etc are not eligible for the exemption.

Check Your Existing Investments Before Making New Tax-Saving Decision

Before making any investment in options, it’s important to ask yourself if you need to invest in them right now. Some options come with lock-in periods you won’t be able to access it until the investment matures.

Review all the investments that you’ve made this year. You might realize that you’ve already reached the Section 80C limit. EPF (Employees’ Provident Fund) contributions, which your employer deducts from your salary every month, are also eligible for tax deduction. Similarly, if you have a home loan, especially in a big city, the principal might already be enough to take full advantage of tax deductions under Section 80C.

Therefore, check your current investments first, as your EPF and home loan repayments might already be enough to cover your tax-saving limit and do not rush into other investments.

Claim Deduction on Medical Expenses for Senior Citizens

Section 80D allows taxpayers in India to claim a deduction on health insurance premiums paid for themselves and their family. This minimises your taxable income, lowering the amount of tax you need to pay.

However, If you are not paying health insurance premiums for a senior citizen, you can still claim a tax deduction of up to Rs. 50,000 for their medical expenses instead.

National Pension System (NPS)

If you’re a private sector employee, and you contribute up to 10% of your basic salary along with any dearness allowance to the National Pension System (NPS), you can claim a tax deduction under Section 80CCD(1) of the Income Tax Act, under the old tax regime. This is subject to the overall 80 C limit of Rs 1.5 lakh. You can also contribute an additional amount of Rs 50,000 to NPS and claim a separate tax deduction under Section 80CCD(1B).

If your employer offers the corporate NPS facility, you can join it and get deductions under Section 80CCD(2). Under the old tax regime, your employer can contribute up to 10% of your basic salary to your NPS account, and this amount is exempted from tax.

Under the new tax regime, this employer contribution can go up to 14%, but employers usually allow you to take advantage of this only at the start of the financial year.

Select the Tax Regime carefully

Think of the FY 2025-26 in your mind, while choosing tax-saving investments. If your calculation shows that the new tax regime is more beneficial in the next financial year, think again before investing in tax-saving instruments that come with lock-in periods and will not add any benefit to your financial goals. For example, avoid investments like life insurance policies with premiums that you don’t need. Even tax-saving options like NPS and PPF require regular contributions, so ensure they suit your future needs.