Things to review before the Financial Year Ends

In few weeks the current financial year is coming to an end. Financial year is very important for tax planning, budgeting and other financial related matters. So let’s look at various points and understand that what we need to do before the completion of this year.

1. Utilise your tax saving investments

Every year you can invest up to Rs 1.5 lakh in certain tax savings instruments like Tax Saver Mutual Funds, PPF, Insurance, Tax Saver FDs, etc which are tax exempt under section 80C. Further you can also save upto 50,000 in NPS under 80 CCD(1) as well as in Mediclaim policies for self and parents (upto 1 lakhs under section 80D) Make sure you are maxing out on these. Your HR will usually require investment proofs before year end so try and finish this off before then. Consult your financial advisor on which 80C investments to make as per your risk profile.

2. Manage Capital Gains/Losses

Now Long-term Capital Gain Tax (LTCG) is applicable for equity and related investments over and above of Rs. 1 lakhs profit. So if you have investments in equities and need money in near term better to book profit accordingly. You can also book losses and set off with profits but remember that Short-term capital loss can be set off against both long-term and short-term capital gain but Long-term capital loss can only be adjusted towards long-term capital gains.  

3. Pay off high-cost debt

If you have any outstanding on high cost debt like credit card’s dues, make it your first priority to pay that off. Interest rates charged by credit cards are exorbitant and can go up to 40-50% per annum (compared to 15% for a personal loan). It is even worth borrowing some amount from your friend or parents or even personal loan and pay off your credit card debt immediately. You can slowly return them the money from your savings.

4. Save TDS

Fixed deposits and recurring deposit holders are afraid of the deduction of TDS. If you currently earn more than Rs. 10,000, Banks may cut TDS. To save TDS, filling in Form 15G or Form 15H is preferable, you need to file it in the first week of the starting of the financial year (i.e. April’22) so that tax is not deducted for next financial year.

5. Review Financial Goals

Take stock of your progress on all your financial goals and check if you are on track to achieving them in time. If needed you may have to top some of them up to get them back on track. In case you haven’t laid down any financial goals for yourself yet, this might be a good time to do so. Emergency Fund, Tax Saving and Retirement are three goals that you can start with.

6. Review spending, plan a budget for the new year and set up SIPs

It is important to look back at the year and see how much you spent. How much of it was planned and how much was impulsive and could have been avoided? Did you meet your savings target? If not then fix a savings target (20-30% of your salary is a good number to begin with) and set up automated savings for that in way of SIPs in Mutual Funds or Recurring Deposits depending on your preference of investment type. Set up your SIPs for a day close to the salary day so that you save first before spending rather than the other way round. Plan a budget for the rest of the amount and make sure you don’t exceed that in the new year.

If you feel you can do with some help regarding your finances, then seek out the help of financial expert who can help you prepare a budget and ensure that you have adequate insurance and savings. The sooner you get a grip on your money, the better it is and it will also prevent you from making any expensive but avoidable money mistakes.