I have only income from interest from saving bank a/c and from LTCG by selling of equity mutual funds, as a housewife. Can I get the zero tax advantage by totaling the above 2 sources amounting upto Rs 7 lacs pa under new Tax regime or Rs 5 Lacs pa in FY 2023-24 . Need your clarification urgently. If possible kindly explain with example.....Thanks

Ans: In respect of capital gains you can claim exemption from long term capital gains if the net sale consideration is invested in booking an under construction house. You get an extended period of three years to get possession in case it is booked with a developer.

In case the sale consideration is not fully invested in the residential house before filing of the Income Tax Return, the unutilised money has to be deposited with a bank under Capital Gains Account Scheme. The money deposited can be utilised within the prescribed period for payment of house.

You have to keep in mind that to claim this exemption, you should not own more than one residential house property on the date of sale of the shares except the one in respect of which you are claiming the exemption.

So once you claim exemption in FY 22 23, it is not advisable to claim exemption against gain earned in subsequent years.

In Income Tax Return, you can show the amount invested in property as exemption u/s 54F and if the entire 10 lakh consideration can not be invested in property then open CG account and show amount in ITR accordingly.

Ans: Selection of tax regime will depend on certain factors. Usually, old scheme is beneficial, if substantial amount is eligible for deduction/exemption. You can do exact comparison through Income tax calculator available at https://incometaxindia.gov.in/Pages/tools/income-tax-calculator-234ABC.aspx

Person is not required to pay any tax if tax liability for FY 23-24 under old tax regime is less than or equal to Rs.25000. Accordingly, if tax liability on Capital gain, Salary and Other sources is less than or equal to Rs.25,000; no tax is required to be paid.

Ans: Understanding Your Financial Situation
Income and Tax Structure
Your annual package is Rs 12 lakh, translating to Rs 1 lakh per month. You currently invest Rs 3,000 in PPF and Rs 5,000 in mutual funds via SIPs. You also pay Rs 20,000 per month as rent. Despite these investments and deductions, your monthly tax deduction ranges from Rs 5,000 to Rs 8,000. Let's delve deeper into optimizing your investments and tax planning.

Monthly Breakdown
Monthly Income: Rs 1,00,000
Rent: Rs 20,000
PPF SIP: Rs 3,000
Mutual Fund SIP: Rs 5,000
Tax Deduction: Rs 5,000 to Rs 8,000
Maximizing Tax Savings
Section 80C Investments
You can claim deductions up to Rs 1.5 lakh under Section 80C. Currently, you are investing Rs 3,000 per month in PPF, totaling Rs 36,000 annually. You can optimize this section further.

Public Provident Fund (PPF)
PPF offers a safe investment with attractive interest rates and tax benefits. Continue with your current PPF SIP and consider increasing it if possible.

Current Annual Investment: Rs 3,000 * 12 = Rs 36,000
Potential Increase: Aim for Rs 1.5 lakh annually to maximize the Section 80C limit.
Equity-Linked Savings Scheme (ELSS)
ELSS mutual funds are tax-saving instruments with a lock-in period of three years. They offer the dual benefit of tax savings and potential market-linked returns.

Annual Investment: Consider allocating a portion of your Rs 5,000 SIP towards ELSS funds.
Lock-in Period: 3 years
Potential Returns: Higher than traditional instruments but with market risk.
Section 80D: Health Insurance
Premiums paid for health insurance policies qualify for tax deductions under Section 80D. This can include policies for yourself, your spouse, children, and dependent parents.

Health Insurance Premiums
Self, Spouse, and Children: Deduction up to Rs 25,000.
Parents (Below 60): Additional deduction up to Rs 25,000.
Parents (Above 60): Additional deduction up to Rs 50,000.
Benefits
Tax Savings: Up to Rs 75,000 if parents are senior citizens.
Health Coverage: Ensures financial support during medical emergencies.
Section 80E: Education Loan Interest
Interest paid on education loans for higher studies can be claimed as a deduction under Section 80E. This deduction is available for a maximum of 8 years or until the interest is fully repaid, whichever is earlier.

Education Loan Interest
Eligibility: Loans taken for higher education of self, spouse, or children.
No Upper Limit: The entire interest amount is deductible.
Section 80G: Donations
Donations made to specified charitable institutions and relief funds are eligible for deductions under Section 80G. The deduction can be either 50% or 100% of the donation amount, depending on the type of institution.

Charitable Donations
Eligible Donations: Donations to specified funds, NGOs, and charitable institutions.
Deduction: 50% or 100% of the donation amount.
Documentation: Ensure proper receipts and documentation for claiming the deduction.
Section 24(b): Home Loan Interest
Interest paid on a home loan for a self-occupied property is deductible up to Rs 2 lakh under Section 24(b). This deduction is over and above the Section 80C limit.

Home Loan Interest
Self-Occupied Property: Deduction up to Rs 2 lakh.
Rented Property: Entire interest amount deductible without any upper limit.
Principal Repayment: Eligible under Section 80C within the Rs 1.5 lakh limit.
Investment Planning
Diversifying Investments
Diversification helps in spreading risk and optimizing returns. Your current investments are a good start, but further diversification can enhance your portfolio.

Mutual Funds
Mutual funds offer a range of investment options across different asset classes. Diversify your mutual fund investments across equity, debt, and hybrid funds.

Equity Funds: For long-term growth and higher returns.
Debt Funds: For stability and regular income.
Hybrid Funds: For a balanced approach combining equity and debt.
Employee Provident Fund (EPF)
EPF is a retirement benefits scheme available to salaried employees. Contributions to EPF qualify for tax deductions under Section 80C.

Employee Contribution: 12% of basic salary.
Employer Contribution: 12% of basic salary.
Tax Benefits: Employee's contribution qualifies under Section 80C.
National Pension System (NPS)
NPS is a government-backed pension scheme offering tax benefits under Section 80C and an additional Rs 50,000 under Section 80CCD(1B).

Section 80C: Contribution up to Rs 1.5 lakh.
Section 80CCD(1B): Additional Rs 50,000.
Tax Savings: Up to Rs 2 lakh in total.
Additional Tax Saving Strategies
House Rent Allowance (HRA)
HRA can be claimed if you live in rented accommodation. The deduction is the least of the following:

Actual HRA received: Rs 20,000 per month.
50% of Salary (Metro): 50% of Rs 1,00,000 = Rs 50,000 per month.
Rent Paid – 10% of Salary: Rs 20,000 - Rs 10,000 = Rs 10,000 per month.
Optimizing HRA Claim
Ensure you have rent receipts and rental agreement documentation. Claim the maximum allowable deduction based on actual rent paid.

Leave Travel Allowance (LTA)
LTA can be claimed for travel expenses incurred for trips within India. It can be claimed twice in a block of four years.

LTA Claim
Eligibility: Travel expenses for self, spouse, children, and dependent parents.
Exemptions: Actual travel expenses (travel fare only, not food or accommodation).
Documentation: Maintain proper travel tickets and receipts.
Tax-Free Allowances and Perquisites
Certain allowances and perquisites provided by employers are tax-free. These can include meal coupons, telephone reimbursements, and conveyance allowances.

Utilizing Tax-Free Allowances
Meal Coupons: Up to Rs 50 per meal is tax-free.
Telephone Reimbursements: Actual expenses incurred for official purposes.
Conveyance Allowance: Up to Rs 1,600 per month is tax-free.
Regular Review and Rebalancing
Importance of Portfolio Review
Regularly reviewing your portfolio ensures it remains aligned with your goals and market conditions. Rebalancing helps maintain the desired asset allocation.

Quarterly Review: Assess the performance and make necessary adjustments.
Annual Review: Reevaluate your financial plan based on changes in income, expenses, or goals.
Professional Guidance
Benefits of Consulting a Certified Financial Planner (CFP)
A CFP provides personalized advice, helping you achieve your financial goals efficiently.

Tailored Strategies: CFPs design investment strategies based on your specific needs and risk tolerance.
Regular Monitoring: They monitor your portfolio and suggest timely adjustments to optimize returns.
Comprehensive Planning: CFPs assist in tax planning, retirement planning, and estate planning, ensuring holistic financial health.
Actively Managed Funds vs Direct Funds
Disadvantages of Index Funds
While index funds offer low costs, they may not provide the best returns. Actively managed funds, despite higher fees, aim to outperform the market.

Expert Management: Fund managers actively select stocks to generate higher returns.
Flexibility: Actively managed funds can adapt to market changes, potentially reducing losses.
Disadvantages of Direct Funds
Direct mutual funds require investor expertise and regular monitoring. Without professional guidance, there’s a risk of poor investment decisions.

Complexity: Direct funds demand more time and knowledge to manage effectively.
Risk of Underperformance: Investors may not achieve optimal returns without proper guidance.
Final Insights
By optimizing your tax-saving investments and making strategic contributions, you can significantly reduce your taxable income. Utilize Section 80C, 80D, 80E, and other sections effectively. Diversify your investments across different asset classes and seek professional guidance for personalized advice. Regularly review and rebalance your portfolio to stay aligned with your financial goals.

Best Regards,

K. Ramalingam, MBA, CFP,

Chief Financial Planner,

www.holisticinvestment.in

Ans: 01. You should file your ITR under new tax regime to minimize your tax liability.
02. Since you have STCG so your tax liability would be there. Under Old regime, you may get a maximum tax rebate of Rs.12,500.00 only. Where as in new regime your tax liability will be comparatively less.
Most welcome for any further clarifications. Thanks.