These five steps can ensure your financial well being in the new financial year

The beginning of the new financial year is an appropriate time to review your finances, investment portfolio and assess the situation.

You can take the corrective measures and steps which will help you make better financial decisions for the year as well as future goals.

Evaluate and re-balance your asset allocation

The BSE Sensex is trading around the 50,000 points mark for days now; it was around 27,000 a year back, in March 2020. The sharp fall and rise in equity markets could have changed your assets allocation. It is critical that we do not lose sight of the fundamentals and maintain the assets allocation as per our risk appetite and goals. Therefore, it is essential to revisit the asset allocation at regular intervals, a new year is an ideal time for the same.

Take stock of your insurance needs

Your life insurance needs keep growing with your income level, liabilities and so on. For instance, once you get married or have a child, you add dependents to your life and hence the need for insurance increases. Even when you take big-ticket loans like home or car loans, your life insurance cover should be enhanced accordingly. Similarly, you should also enhance your health insurance coverage as you get older.

Initiate Tax Planning

The start of the financial year is the best time to do tax planning for the year. One should not wait till the last few months for investing in tax-saving instruments, as it can create liquidity problems. So, tax planning at the start of the financial year can help you spread your investment across the year and eventually help you manage your funds properly.

Submit Form 15G or 15H as applicable if required

Interest incomes from bank deposits are subject to tax deduction at source (TDS). However, if your total income is expected to remain below the taxable limit, submit the form 15G or 15H to avoid unnecessary TDS on your returns from deposits. Individuals who are below the age of 60 years are not required to pay tax on income up to Rs 2.5 lakh, while those between the age of 60 years to 80 years are not required to pay tax on income up to Rs 3 lakh and individuals above the age of 80 years are not required to pay tax on income up to Rs 5 lakh.

Submit investment and expenses deceleration to your employer

To avoid TDS on salary income, don’t forget or delay submitting investments and expenses declaration that you have planned for the year to your employer. For instance; make a declaration for life and health insurance premium that you will pay, the investment you are planning in ELSS, PPF and so on. Also, make declaration of children school fees, home loan repayment and so on.

Many such investments and expenses qualify for deduction under various sections of the Income Tax Act and help you bring down your tax liability. Employers are required to consider such deceleration while calculating tax liabilities or employees and hence TDS comes down accordingly.

However, make sure you invest or spend as per the deceleration you made or else high TDS will get adjusted from the last few months’ salaries.

(The writer is a SEBI Registered Investment Advisor (RIA), and CEO, Hum Fauji Initiatives, a financial planning firm. Views expressed are personal)