Your investments for fiscal year 2024-25 and their influence on the tax return for assessment year 2025-26.

1. Tax-Saving Investments: The Importance of Deductions (Mainly Old Regime)

If you are planning to submit your AY 2025-26 return under the Old Tax Regime, the tax-saving investments you carefully made during FY 2024-25 can significantly assist in reducing your Gross Total Income. Check your portfolio for investments that qualify under these well-known sections:

Section 80C (Limit of 1.5 Lakh):

• Equity Linked Savings Schemes (ELSS) mutual funds
• Contributions to the Public Provident Fund (PPF)
• National Savings Certificates (NSC)
• Premiums for Life Insurance (LIC, etc.)
• Repayment of Home Loan Principal
• Tuition Fees for Children
• 5-Year Tax-Saving Fixed Deposits
• Unit Linked Insurance Plans (ULIPs)
• Sukanya Samriddhi Yojana (SSY)

Section 80CCD(1B) (Up to 50,000): Additional deduction for contributions to the National Pension System (NPS).

Section 80D: Premiums for Health Insurance paid for yourself, family, and dependent parents (limits vary with age).

Section 80G: Donations made to recognized charitable organizations (confirm eligibility percentage).

Section 80E: Interest paid on Education Loans for higher education.

Section 80TTA/TTB: Deduction on interest income from savings accounts (different limits for regular taxpayers and senior citizens).

Important Note: If you made these investments between April 1, 2024, and March 31, 2025, gather the necessary documents now to claim these deductions accurately in your AY 2025-26 ITR, assuming you opt for the Old Tax Regime.

If you decide to select the New Tax Regime for AY 2025-26 (which is known for its reduced tax rates), be aware that most popular deductions mentioned earlier (such as 80C, 80D, HRA exemptions, etc.) will not be available.

What this implies: Investments made in ELSS, PPF, tax-saving FDs, etc., during FY 2024-25 primarily for tax advantages under the old system will not lower your taxable income if you choose the new regime now.

Exception: The deduction for the employer’s contribution to NPS (Section 80CCD(2)) is typically still available under the new regime.

Time to Decide: Assess whether the lower tax rates under the new regime justify the absence of deductions given your investment and income profile for FY 2024-25.

Not all investments provide tax benefits; some yield income that must be reported and taxed in AY 2025-26:

Interest Income: Interest accrued during FY 2024-25 from Bank Fixed Deposits (FDs), Recurring Deposits (RDs), Corporate Bonds, and National Savings Certificates (upon accrual/maturity) is taxable under 'Income from Other Sources.'

Dividend Income: Dividends obtained from stocks or mutual funds during FY 2024-25 are typically taxable based on your applicable slab rate.

Rental Income: If you invested in real estate and received rent during FY 2024-25, this income must be reported under 'Income from House Property' after allowable deductions (like standard deduction, municipal taxes paid, and home loan interest).

Make sure to collect interest certificates and relevant documents to report this income accurately, regardless of the tax regime you choose.

Did you sell any investments such as stocks, mutual funds, real estate, or gold during the fiscal year 2024-25? The resulting profit (Capital Gain) or loss (Capital Loss) must be reported in your income tax return for the assessment year 2025-26.

Short-Term Capital Gains (STCG): Typically arise from assets held for a shorter period (e.g., listed equity shares/equity mutual funds sold within one year). Tax rates differ based on the type of asset (e.g., 15% for listed equity/equity mutual funds where Securities Transaction Tax is paid).

Long-Term Capital Gains (LTCG): Come from assets held for an extended period (e.g., listed equity/equity mutual funds sold after one year, real estate after two years). Tax rates and indexation benefits differ (e.g., LTCG on listed equity/equity mutual funds exceeding 1 lakh is taxed at 10% without indexation).

Capital Losses: These may often be offset against capital gains or carried forward to subsequent years according to income tax regulations.

Precise calculation and reporting are crucial. Obtain your capital gains statements from your broker or mutual fund house.

Your tax filing for the assessment year 2025-26 will only be as accurate as the records from fiscal year 2024-25. Before you file:

Collect Proofs: Gather all documentation related to investments, receipts for premiums, donations, interest certificates, home loan statements, and capital gains statements.

Review Form 26AS and AIS/TIS: Access the Income Tax portal and check your Annual Information Statement (AIS), Taxpayer Information Summary (TIS), and Form 26AS. These documents reflect financial transactions reported by different entities. Ensure that the information aligns with your records and report any inconsistencies.

The investments you made during fiscal year 2024-25 are not merely past events; they play an active role in shaping your current tax obligations for assessment year 2025-26. Whether it's about claiming deductions under the old tax regime, recognizing taxable income, or reporting capital gains, a comprehensive review of your investment activities from fiscal year 2024-25 is crucial at this time. By gaining an understanding of these connections and collecting the required documentation, you can file a precise and optimized tax return for assessment year 2025-26.

Disclaimer: Tax regulations can change, and this blog post serves informational purposes only. For tailored advice, please consult a qualified tax professional. You can connect with experienced tax experts through myitronline.

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