Tax Planning Tips for All Age Groups

For Young Age (20s to Early 30s)¹
 

Generally, at this phase, an individual starts earning. While they  may not have a taxable income yet, it's important to understand the various tax-saving investment options available to minimise future tax liability. Here are some tax-planning tips for young adults to consider.

1. Tax-saving investments¹ like the Public Provident Fund (PPF) and Equity Linked Savings Scheme (ELSS) offer tax deductions under section 80C.
2. Life insurance is also a good option to consider for investment when you are young and the only earning member in your family. The premium you pay for a life insurance policy is eligible for tax deduction under section 80C (in the case of the old tax regime), provided you maintain the policy for a minimum of 2 years.
3. Retirement plans like the National Pension Scheme (NPS)⁴ are another investment option to create a retirement fund. The earlier you invest, the more retirement corpus you can accumulate. An NPS subscriber can claim tax benefits under section 80CCD(1) of upto ₹ 1,50,000 and can get an additional tax benefit of upto ₹ 50,000 under section 80CCD(1B) (under the Old Tax Regime).
4. House Rent Allowance⁵ is also eligible for tax exemption under section 10(13A). If HRA is a component of your salary and you live in a rented accommodation, you can claim partial or full exemption.
    

For Early Middle Age (30s to 50s)¹

At this phase, individuals achieve significant milestones such as marriage, acquiring assets like a home and vehicle, becoming parents, growing their careers, and funding their children's education. This period is marked by substantial expenses, increased responsibilities and a potential for savings. Here are some expenses through which you can maximise your tax savings.

1. Home loan² interest qualifies for tax benefits under section 24 up to ₹ 2,00,000. The principal repaid, stamp duty, and registration charges are deductible under section 80C up to ₹ 1,50,000. Additional deductions may apply under sections 80EE and 80EEA if conditions are met.
2. If you do not have life insurance, invest in a policy in your 30s to secure your family’s financial future.
3. As you enter your mid-30s, you might need to apply for a Child Education loan; the interest that you pay is also eligible for deduction under section 80E⁷  ( subject to certain conditions in the Act ).
4. Long-term saving instruments⁸ such as fixed deposits, Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC) and Unit Linked Insurance Plans (ULIPs) also offer tax rebates.
    

For Pre-Retirement Age (50s to 60s)¹

At this phase, an individual is about to retire and seeks stability. Here are some tax-saving tips to consider as you prepare for this transition.

1. Pay off Debts like home loans, education loans or any other loan you have taken.
2. Review your retirement plans, such as NPS, PPF, EPF, and other investments like mutual funds. You can increase your contributions to grow your retirement corpus. Additionally, withdrawals should be planned  from retirement funds  after considering tax implications. Remember, for NPS, you can claim an additional deduction of ₹ 50,000.
    

For Retirement Age (60s and above)¹

Retired senior citizens have higher tax exemptions and other benefits which they can optimise.

1. Invest the retirement benefit in a Senior Citizen Savings Scheme (SCSS) for regular income and tax benefit under section 80C.
2. Under section 80TTB, claim a deduction of upto ₹50,000 for interest income from savings accounts, fixed deposits and recurring deposits.
3. Medical expenses and health insurance premiums are also eligible for tax deductions.
    

Conclusion

After understanding tax planning all age group tips, you will now have an idea of how you can optimise your investments for maximum tax benefits. However, always remember that tax benefits should be the result of your investments and not the primary objective. The earlier you start tax planning, the better it is because you not only save your income but also start understanding tax planning for different age groups, financial planning and investment strategies, paving the way for a more secure financial future.
 

FAQs
 

1. What is the tax slab in the old regime for different age groups?³
 

 

2. At which time is an individual exempt from filing an income tax return?⁶ⁿ
 

Section 194P of the Income Tax Act states that senior citizens  who are 75 years and above are exempt from filing income tax returns if certain conditions are met.
 

2. What is tax planning?
 

Tax Planning It is the process of accessing your income and utilising tax-saving instruments to lower your tax liability. It helps you save taxes and also invest in your financial goals.
 

3. What is the financial year and assessment year?
 

A financial year is a year in which the income is earned; it begins on the 1st of April of a calendar year and ends on the 31st of March of the following calendar year.

An assessment year is the year immediately following the financial year in which a taxpayer evaluates his income and pays taxes. For income earned in the financial year 2024-2025, the assessment will be done in the year 2025-2026.