There are certain tasks you need to perform at the beginning of the new financial year to manage your finances better. As the new fiscal year begins today, let us look at some of the tasks that you need to keep in mind.
Contribution towards PPF: Public Provident Fund (PPF) is one of the most favoured investments and people often invest up to ₹1.5 lakh to claim deduction under Section 80C. However, it is seen that most of the time people invest in PPF at the last moment. It is always advisable to invest in PPF at the beginning of the year itself.
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“If a person invests in PPF at the beginning of the year, he or she can earn interest for the entire year, while in case investment is made in the end of the year one will lose out on the interest portion, ” said Prakash Hegde, a Bengaluru-based Chartered Accountant. Even if you are contributing on a monthly basis, it is advisable to contribute by the fifth of every month as the interest calculation is done on the balance on that day of the month. The interest rate on PPF is revised every quarter by the government. For the quarter ending 30 June, the government has kept the interest rates unchanged after drastically reducing it.
Submitting of Form 15H/15G: Banks deduct Tax Deducted at Source (TDS) before paying the interest to depositors. However, in case your income is below the exempted limit and you are not eligible to pay any taxes, you can submit Form 15G/H to avoid the TDS deduction by banks. These forms need to be submitted to the financial institutions such as banks, post offices etc at the beginning of the financial year.
Decide on the tax regime: Taxpayers have the option to choose between the two tax regimes. The new tax regime allows the taxpayers to be taxed at a lower slab rate, though one needs to forgo around 70 deductions allowed under the old tax regime. Individual taxpayers can choose between the two tax regimes at the time of filing of tax returns. However, choosing at the beginning of the year helps in tax planning in a better way.
Collection of documents for ITR filing: You will need to file income tax return soon. It will be better that you start collecting the documents now to avoid the last-minute rush. Collect documents such as banks interest statements, mutual funds investment statements from individual fund houses in case you are investing directly.
Plan your taxes now: Most people do their tax planning at the last moment and end up investing in instruments which may have a higher lock-in period or may not match the taxpayer’s risk profile. Therefore, it is always advisable to plan your taxes right at the start of the financial year.
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