Smart Taxpayers Don’t Evade – They Strategize!
Many taxpayers today believe that the era of tax planning is over. With the New Tax Regime (NTR) becoming the default choice, they assume that deductions, exemptions, and smart planning have all vanished into history. “There’s nothing left to plan,” they say – as if the NTR has locked every door to savings. But that’s only half the truth. The NTR may have trimmed the branches, but the tree of tax planning still stands tall – greener, leaner, and wiser. The rules have changed, not the game. Smart taxpayers still find legal and intelligent ways to save tax, time their income, and structure their investments efficiently.
So, before you conclude that tax planning is extinct, let’s rediscover some timeless and still-relevant ideas – strategies that continue to work beautifully even in this new tax era, helping you save legally, wisely, and sometimes even wittily.
1. PPF: The Evergreen Tax-Free Treasure:
Yes, the NTR doesn’t give any Section 80C deduction for PPF deposits. But that doesn’t make PPF any less attractive. Why? Because the interest and maturity amount are fully tax-free – a luxury few instruments now offer. In short: you don’t get a deduction for investing, but you still get a tax-free return. In a world where almost every income is taxed, PPF remains that old, loyal friend – steady, silent, and sovereign safe.
2. Timing Is Everything – Delay Can Be Divine:
Whether you’re in the old or new regime, timing remains the eternal trick. If you’re planning to sell your property, mutual funds, or shares, don’t rush – pause. Selling at the right time – keeping exemptions and loss set-off provisions in mind – can lighten your tax burden. Timing remains a powerful strategy under both tax regimes, because time is tax-neutral but strategy-sensitive.
3. Choose Silent Incomes Over Noisy Ones:
Fixed Deposits (FDRs) are brutally honest – they declare your interest income every year, triggering annual tax. Mutual Funds (or shares), on the other hand, are discreet companions. You’re taxed only when you sell, not every year. That means your money grows uninterrupted by yearly tax bites. This “tax deferral” trick works beautifully under both regimes, since capital gains rules remain identical whether you’re in old or new.
4. ULIPs: The Old Wine with a New Rule:
ULIPs (Unit Linked Insurance Plans) were once the tax planner’s sweetheart – combining investment, insurance, and tax-free maturity. But beware the post–Feb 2021 rule: If your total annual premium across all ULIPs exceeds ₹2.5 lakh, the maturity proceeds (except death benefits) become taxable. And remember: under the NTR, you don’t get any deduction under Section 80C for ULIP premium either. So, ULIPs still have the charm of yielding tax-free income, subject to the max cap of ₹2.5 lakh. Beyond that, the sweetness turns into a taxable hangover!
5. Gold Sovereign Bonds: The Guilt-Free Glitter:
Gold never goes out of fashion – and lately, it seems to be setting fashion statements of its own! With prices touching lifetime highs, every family locker is feeling a little richer, and every taxpayer is secretly patting themselves for buying that “one more bangle” years ago. For decades, gold has proved to be the most loyal investment partner – no tantrums, no defaults, just quiet appreciation. But physical gold comes with taxes, GST, and anxiety. Enter Sovereign Gold Bonds (SGBs) – the RBI’s golden gift to tax-smart Indians. They pay annual interest (taxable, yes, but modest). Best of all — capital gains on redemption after maturity are tax-free! Whether you are in the old or new regime, this is one golden investment that truly shines both ways.
Although the government has paused fresh issues of Sovereign Gold Bonds, investors can still buy them from existing holders through stock exchanges. The buyer continues to enjoy the 2.50% annual interest and tax-free capital gains on redemption at maturity. It’s one of the few instruments where even a second-hand purchase retains its golden tax advantage.
6. Gifting: The Family Tax Shuffle:
The “art of giving” can also be the “science of saving.” Gifts to your spouse or minor child will get clubbed with your income, but gifts to your parents, adult children, or in-laws are outside the clubbing net. Example: Gift ₹5 lakh to your retired father. He invests it in a fixed deposit and earns interest taxed at his lower slab rate. Same family income, smaller family tax! (Applicable under both regimes). This has become even more relevant, as individuals with income up to ₹ 12 lakh will have zero tax liability from FY 2025–26.
7. Capital Gain Harvesting: Book Profit, Save Tax:
Who says tax planning died with the old regime? It just changed its costume. Under both regimes, long-term capital gains (LTCG) on listed shares or equity mutual funds are tax-free up to ₹1.25 lakh per year. So, if your portfolio has appreciated nicely, you can sell investments worth just enough to realize ₹ 1.25 lakh of gain, book that profit, and reinvest – without paying a single rupee of tax! This is called capital gain harvesting – a smart way to reset your purchase cost and reduce future taxable gains. It’s legal, simple, and doesn’t require any Section 80C or 80D deduction – only presence of mind and one smart click on your trading app. In short, even under the new regime, timing your sales smartly can save you tax quietly.
And Finally … Tax Planning ≠ Tax Evasion:
Tax planning is the art of arranging your affairs within the law to minimize tax. Tax evasion is manipulating your affairs outside the law to escape tax. One makes you a prudent planner. The other makes you a potential prisoner. So plan, don’t panic. Defer, don’t disappear. Invest, don’t invent. Because at the end of the day, the smartest taxpayer isn’t the one who earns more – it’s the one who plans better, legally.
Final Thought:
The New Tax Regime may have clipped some old wings of deduction, but it hasn’t killed the bird of opportunity. It’s no longer about hoarding investment proofs or counting Section 80 deductions. It’s about timing your income smartly, planning for tax-free incomes, and adopting family-friendly ideas to make your tax life lighter. After all, the most satisfying refund doesn’t come from the Income Tax Department — it comes from your own intelligent planning.
[Views expressed are the personal view of the author. Readers are advised to seek professional advice before taking any decisions. Readers may forward their feedback & queries at nareshjakhotia@gmail.com. Other articles & response to queries are available at www.theTAXtalk.com]
