CA Reveals 6 Insane Tax Saving Strategies (Just Copy These!)

Summary

In this video, Nirj, a partner at Holistic Prime Wealth, shares valuable tax-saving strategies for individuals in the new tax regime. He discusses various techniques like maximizing employee provident fund (EPF) contributions, leveraging the national pension scheme (NPS), tax-efficient gifting strategies, and tax gain harvesting. Nirj also touches on the importance of business income deductions, effective fund allocation to reduce tax liabilities, and suggests exploring mutual funds over traditional fixed deposits for better tax benefits. He emphasizes practical strategies that can help individuals minimize their tax burdens while achieving financial goals.

Takeaways

• 😀 Contributing 12% of your basic salary to the Employees' Provident Fund (EPF) can help you save taxes, as the employer's contribution is not taxed.
• 😀 If you convince your employer to contribute to the National Pension Scheme (NPS), up to 14% of your basic salary can be tax-free.
• 😀 Employer contributions to both EPF and NPS are exempt from taxation, allowing for a combined annual tax-free contribution of up to ₹7.5 lakh.
• 😀 Avoid transferring money to your spouse to save taxes due to clubbing rules; instead, gift money to your parents for tax-free income generation.
• 😀 Gifts received during a wedding are tax-free, but you must maintain proper records (photos, videos, and lists of gift-givers).
• 😀 Tax loss harvesting allows you to offset capital gains tax by selling stocks or mutual funds that are in a loss position and carrying forward those losses for up to 8 years.
• 😀 Tax gain harvesting helps you book tax-free profits of up to ₹1.25 lakh annually by selling stocks or mutual funds held for over a year and reinvesting the amount.
• 😀 If you have business or freelance income, you can claim deductions for related expenses like subscriptions or consulting fees, reducing your taxable income.
• 😀 Keeping large amounts in a savings account or fixed deposits can lead to taxable interest income; consider moving funds to mutual funds for better tax advantages.
• 😀 Different types of mutual funds, such as arbitrage funds or equity savings funds, offer lower taxes compared to fixed deposits or debt funds, making them a good option for long-term savings.

Q & A

What are the two types of contributions to the Employees' Provident Fund (EPF)?

The two types of contributions to the EPF are 1) 1,800 rupees per month and 2) 12% of the basic salary.

How does the employer's contribution to EPF affect taxability?

The employer's contribution to EPF is not considered part of your income and is not taxable.

How can contributing to the National Pension Scheme (NPS) help reduce taxes?

If your employer contributes to NPS, up to 14% of your basic salary can be contributed to NPS. This employer contribution is not considered part of your income and will not be taxed.

What is the maximum amount that can be contributed to EPF and NPS without it becoming taxable?

The maximum combined contribution to EPF and NPS from the employer is 7.5 lakh rupees per year. Any amount beyond this is taxable.

What mistake do people often make when transferring money for investment purposes?

Many people mistakenly transfer money to their spouse's name for investment, which leads to taxable income due to clubbing of taxation rules.

Can gifts received during a wedding be considered tax-free?

Yes, gifts received during a wedding are tax-free, but you need to maintain records of the gifts and their sources for tax purposes.

What is tax loss harvesting, and how does it work?

Tax loss harvesting involves selling investments that have incurred losses (either short-term or long-term). The losses can be carried forward for up to 8 years and offset against future capital gains to reduce taxes.

How can you save taxes by engaging in tax gain harvesting?

In tax gain harvesting, if you have long-term capital gains up to 1.25 lakh rupees, you can sell your investments to book profits, which are tax-free, and reinvest. This resets your cost basis, reducing future taxes on gains.

How can business income help in reducing taxes?

If you have business income, such as from a YouTube channel or consulting, you can deduct business expenses (e.g., editor fees, subscriptions) from your income, thereby lowering your taxable income.

What is the tax implication of keeping large amounts of money in bank accounts or fixed deposits?

Interest earned on fixed deposits and savings accounts is fully taxable. To reduce taxes, consider moving money into mutual funds, where tax will only apply when the funds are sold.