Reassess choice of tax regime, spread investments across year

Investments in Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) should be made by the 5th of April

The start of a new financial year is a good time to reassess your financial and tax planning strategies. Once there is a plan in place, one can follow it systematically over the year. 

“Tax planning, for instance, if not started in April, leads to hasty, poor-quality investments at the end of the financial year,” says Abhishek Kumar, Securities and Exchange Board of India (Sebi)-registered investment adviser and founder, SahajMoney.com. 

Complete financial tasks early 

Investments in Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSY) should be made by the April 5. “You will then be able to earn interest on these products for the entire year,” says Arvind Rao, founder, Arvind Rao & Associates. 

Review your family emergency fund and replenish it if needed. Revisit financial goals to see if there is any change in timeline or the corpus required. For large expenses like house purchase, renovation, or travel, set a savings target and a plan for contributing towards them. 

Following the recent repo rate cut by the Reserve Bank of India (RBI), many banks have reduced home loan rates. “Check whether your home loan rate has declined. If not, contact the bank and get it to do so,” says Rao. If a better rate is available elsewhere, consider switching. 

Review your Employees’ Provident Fund (EPF) contributions. “Interest on contributions above ₹2.5 lakh per year becomes taxable, so check if you should contribute to Voluntary Provident Fund (VPF),” says Kumar. 

Choose tax regime, notify employer 

The Union Budget of 2025 made the new tax regime more appealing, necessitating a fresh assessment this year. “Factor in all the tax deductions and exemptions you can avail of under the old regime. Then do an objective comparison of the two tax regimes and see whether the new one is more favourable from this year,” says Suresh Surana, a Mumbai-based chartered accountant. Rao adds that those going for the new regime may stop the tax-saving investments they did earlier. Employees should inform their employer of their choice of regime and declare relevant investments. “This will help avoid excessive tax deduction,” says Surana.

  Plan tax-saving investments 

If the old tax regime remains more favourable, consider Section 80C options like PPF, Equity Linked Savings Schemes (ELSS), National Savings Certificate (NSC), etc. “Allocate systematically to these products if your EPF contribution falls short of the ₹1.5 lakh limit,” says Kumar. 

Spreading these investments through the year helps avoid a cash crunch in the fourth quarter and enables rupee-cost averaging in case of ELSS. “If you plan to buy a house on loan or travel, then factor in the tax-saving opportunities on home loan principal repayment (Section 80C), interest repayment (Section 24), and leave travel exemption under Section 10(5),” says Surana.

Account for Section 80D deduction — up to ₹50,000 for senior citizens and ₹25,000 for others — on health insurance premiums. Rao suggests creating an investment calendar for the year to make the process orderly and setting reminders for advance tax payments, income-tax return filing, etc. 

Submit Form 15G/15H if eligible 

If your annual income is below the taxable threshold and you hold fixed or recurring deposits, submit Form 15G or 15H to your bank to avoid tax deduction at source (TDS) on interest income. Rao suggests factoring in the increased TDS thresholds on bank fixed deposits for senior citizens, and rental payments.  

 

Diversify investments instead of being overexposed to one asset class 

Include both low-risk (PPF) and growth-oriented products (ELSS) 

Factor in inflation; excessive allocation to fixed deposits could result in negative real returns

  Investing in the National Pension System (NPS) can help you save for retirement and avail additional tax deduction of ₹50,000 under Section 80CCD (1B) 

Do not overlook capital losses from previous years in stocks, mutual funds or property; factoring them in can reduce tax liability 

n Maintain proper record of financial transactions so that you have proof in case of a tax audit