Tax planning helps you analyse your financial position and find ways to lower net taxable income and overall tax outgo using various provisions available under the Income Tax Act, 1961. It become even more important to review tax planning periodically as the government frequently brings changes to income tax rules either during the Union Budget announcements or at other times.

Proper tax planning not only helps you manage your tax outgo but also enables you to meet both short-term and long-term financial objectives. Remember, tax planning is not a one-time activity; it is an ongoing process as long as your income remains stable and taxable.

Now, as the year draws to a close, it’s the perfect time to reassess your financial position and optimise your tax liability.

Niyati Shah, Vertical Head – Personal Tax at 1 Finance, emphasises that “tax planning is not just about saving taxes – it’s about creating a roadmap for financial efficiency and long-term security. With the right strategies, you can significantly reduce your tax burden while aligning your savings and investments with your financial goals.”

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Here are five essential tax planning actions to help you make the most of your hard-earned money:

  1. Tax Harvesting

Tax harvesting involves selling securities at a loss to offset taxable gains. Investors can strategically book long-term capital gains (LTCG) up to Rs 1.25 lakh annually, as these remain tax-free under Section 112A of the Income Tax Act, 1961. Additionally, losses can be carried forward to offset future gains. By selling and reinvesting, you can reduce future tax liabilities without impacting your overall investment portfolio.

  1. Donations with tax benefits

Donating to society not only creates a positive impact but also offers tax benefits. As Ms. Shah highlights, “donations made to registered charities under Section 80G of the Income Tax Act, 1961, offer deductions up to 100% or 50%, depending on the organization.” Be sure to keep receipts and confirm the charity’s eligibility for tax benefits.

  1. Retirement planning with tax deductions

Secure your retirement while saving on taxes. Investments in the National Pension System (NPS) allow for additional deductions up to ₹50,000 under Section 80CCD(1B), over and above the Rs 1.5 lakh limit under Section 80C. Employers’ contributions to the NPS also provide deductions – up to 10% of the basic salary in the old regime and up to 14% in the new regime.

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  1. Health Insurance: A win-win strategy

Health insurance is not just a shield against unexpected medical expenses; it also comes with tax advantages. Ms. Shah notes, “premiums paid for yourself, your family, and your parents are deductible under Section 80D, up to ₹1,00,000. This benefit also covers preventive health check-up expenses up to ₹5,000.” It’s financial protection with a tax-saving bonus.

  1. LTA (Leave Travel Allowance)

Travel can be a joy—and a tax-saving opportunity. Under Section 10(5) of the Income Tax Act, 1961, employees can claim tax exemptions on domestic travel expenses for themselves and their family during approved leaves. Proper documentation is necessary to avail this benefit.

Conclusion

Shah concludes by stating, “tax planning doesn’t have to be complex or last-minute. By implementing strategies like tax harvesting, structured savings, and smart investments, and by evaluating which regime is beneficial for you, it enables reduced tax outflows and boosts financial growth.” A proactive approach transforms taxes from an annual burden into an opportunity to build wealth and secure financial freedom.