Tax in India: Pay Less, Stay Compliant

Taxes are just another cashflow. Treat them like EMIs—predict, optimise, and pay on time. Here’s how professionals keep it clean and efficient without spreadsheets taking over their life.

Choose Your Regime Like a Pro

• New Regime: Lower rates, fewer deductions. Works well for high earners with minimal deductions.
• Old Regime: Higher rates but richer deductions (80C/80D/HRA/LTA/etc.).

How to decide: Model both by April using your salary structure and planned investments. If your employer allows mid‑year switches, re‑check after any big changes (bonus, home loan, ELSS, HRA changes). Use our calculator to compare effective tax.

Salary Structuring Levers (Salaried)

• HRA: Keep rent receipts. If you work in a metro, the 50% rule is generous. Negotiate HRA in CTC; it’s not automatic.
• LTA: Claim against eligible travel with proof; plan two years’ claims within a block.
• NPS (80CCD(1B)): Extra ₹50,000 deduction over 80C. Great for high‑bracket earners comfortable with the lock‑in.
• Flexi benefits: Meal cards, telephone/internet reimbursements, and fuel policies—worth organising early in the year.

Self‑Employed/Business Levers

• Expense discipline: Separate business and personal expenses; pay via traceable modes. Rent, utilities, software, professional fees—claim what’s legitimate.
• Presumptive taxation: Consider 44ADA/44AD to reduce compliance if your margins and turnover fit.
• Advance tax: If tax due > ₹10,000, pay quarterly (Jun/Sep/Dec/Mar) to avoid 234B/C interest. Calendar it.

Capital Gains: Don’t Donate Returns to Taxes

• Equity mutual funds/stocks: LTCG at 10% above ₹1 lakh gains/FY; STCG at 15%.
• Debt funds (investments since Apr 2023): Gains taxed at slab; indexation gone. Use goal‑aligned duration and target‑maturity funds to reduce timing risk.
• Real estate: Hold for 24+ months to qualify as long‑term. Reinvest via bonds/another house within timelines if using exemptions.
• SGBs: Interest taxable; capital gains exempt at maturity. Selling early can trigger capital gains.

Tactics: Harvest gains up to the ₹1 lakh LTCG limit each year in equities where appropriate. Stagger redemptions around FY‑end to manage thresholds and surcharges.

Quick Reference: STCG & LTCG (FY 2024–25)

• Equity shares & equity‑oriented mutual funds (STT paid): STCG 15% (≤ 12 months); LTCG 10% on gains above ₹1,00,000 per FY (no indexation)
• Debt mutual funds (units acquired on/after 1 Apr 2023): All gains taxed at slab; no indexation; holding period doesn’t change the rate
• Debt mutual funds (units acquired before 1 Apr 2023): STCG slab (≤ 36 months); LTCG 20% with indexation (> 36 months)
• Gold and other capital assets (gold ETFs, physical gold): STCG slab (≤ 36 months); LTCG 20% with indexation (> 36 months)
• Real estate (immovable property): STCG slab (≤ 24 months); LTCG 20% with indexation (> 24 months); exemptions possible under 54/54F/54EC (conditions apply)
• Sovereign Gold Bonds (SGBs): Interest taxed at slab; capital gains exempt at maturity (RBI redemption). Early sale on exchange taxed per holding period (typically ≤ 36 months = slab; > 36 months = 20% with indexation)

Note: Surcharge and cess apply as per law. Always check current rules before transactions; tax law evolves and specific instruments may have exceptions.

HRA: Quick, Practical Formula

Exemption = Minimum of:

• Actual HRA received
• 50% of basic (metro) or 40% (non‑metro)
• Rent paid − 10% of basic

Paper trail matters more than theory—keep rent agreement, rent receipts, and landlord PAN if rent > ₹1 lakh/year.

Annual Tax Checklist (Do This Once, Save All Year)

• April: Pick regime, set SIPs/PPF/ELSS if using 80C; opt NPS 80CCD(1B) if relevant.
• June/Sept/Dec/Mar: Pay advance tax if needed; reconcile TDS on salary and interest.
• Jan–Mar: Don’t rush ELSS at year‑end—stagger across the year to reduce market timing risk.
• Form 26AS/AIS: Check for mismatches; fix before filing.

Tools

• Income Tax Calculator: Compare regimes and compute liability.
• HRA Calculator: Estimate HRA and generate rent receipts.
• F&O Tax Calculator: If you trade derivatives, classify income and compute taxes correctly.