With just a few days left to usher in the New Year 2023, it is the time of the year when people go high on making resolutions for every sphere of life. Among New Year resolutions, financial pledges related to investments and tax planning of all sorts are generally high on most individuals' promise lists including of near and dear ones.

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So, here some quick tips on how to plan tax savings next year:

Do a careful planning

Careful planning is required through the year not only to ease the year-end pressure, but also to get better returns. An individual can avail deduction of up to Rs 1.5 lakh under section 80C of the Income Tax Act. There are various options available under this to avail the exemption. Some of them give fixed returns, while it may vary for others as they are market-linked instruments.

Identify the tax regime

Salaried people should further identify which tax regime is good for them (the old one or the new one). For better tax management, investors should calculate their tax liability under both tax regimes and opt for one involving the least tax outgo.

Budget 2020 introduced a new tax regime with a lower tax rate, in the interest of those who were unable to avail benefits under the older tax regime. However, this regime is optional.

So, what are the options?

While insurance is a must have in portfolio, more as a safety net, should definitely invest in Equity Linked Saving Scheme scheme or ELSS.

ELSS not only give the benefits under Section 80C, but also help in growing wealth. A mandatory lock in of 3 years in ELSS funds actually helps investors create a healthy corpus.

If there is the possibility of further investment beyond 80C then one should also invest in National Pension System or NPS.

As per experts, one should also claim all deductions like donations made during the year. If supported by the employer, the employees can also avail of LTC benefit by meeting the required conditions.

For individuals in mid 50s who don't want to take risks, should opt for fixed return instruments such as fixed deposits, National Saving Certificate (NSC) and Public Provident Fund (PPF) is a better option.

For people in the late 40's, FD or NSC is a better option as the lock-in period is just 5 years as compared to PPF whose lock-in period is 15 years.

Individuals can also opt for a mix portfolio to have a balanced return with PPF providing the fixed benefit of 7-8 percent as decided by the government and using market-linked products like ELSS which can give 12-14 percent in the long term and have a lock-in period of 3 years.

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