Introduction:
After the important union budget day, the decision taken by the Modi 3.0 government made some important changes in the Indian economy. “The bridge to build Viksit Bharath 2047 is in the hands of tax payers,” said Sitharaman.
The new Income tax regime was produced to help the middle class to support their financial needs. After this new rule people are having more money in their hands which are the payable taxes. The main question that comes to everyone’s mind is should we spend it or invest it to make more money. Here is the complete guide on how to use tax savings wisely to boost your investments.
New Tax regime (The outcomes of iconic day):
Indian taxpayers’ disposable incomes are set to go up with the hike in ‘nil’ tax limit to Rs 12 lakh and widening of tax slabs announced in Budget 2025.
The increased savings resulting from the new tax regime may tempt individuals to splurge, but experts caution against overspending. “It’s crucial to strike a balance between spending and investing,” advises Nitesh Buddhadev, founder of Nimit Consultancy.
Don’t Discard long-term investments for new tax rule:
who have migrated to the optional tax regime announced in 2020-21, which does not allow for deductions such as tax avoidance schemes and other deductions. Many people have opted for investments like equity-linked savings schemes (ELSS), public provident fund (PPF) and the Sukanya Samriddhi Yojana given their potential to reduce tax liabilities. However, these investments often have a secondary benefit: fostering a disciplined approach to saving & Investing
While the new tax regime does not provide direct tax benefits for investments in schemes like ELSS, PPF, Sukanya Samriddhi Yojana and insurance, they still offer significant value beyond tax savings. They play a vital role in achieving long-term financial stability, retirement goals and securing one’s family’s future. They also provide essential risk protection.
Beyond tax benefits: Why long-term investments are essential
Despite the absence of tax deductions under the new regime, ELSS funds will continue to offer potential for higher returns because of equity market participation. Alternatively, to achieve your long-term financial goals you can channel your savings systematically into diversified equity mutual funds, of which ELSS funds constitute a subset. Unlike ELSS funds, regular equity funds do not come with the three-year lock-in period.
Start Investing Through SIP with Tax Saved
Consider using the tax savings from Budget 2025 to fund a Systematic Investment Plan (SIP) rather than squandering them on pointless purchases. You can establish a methodical approach to wealth accumulation by reinvesting your tax savings, guaranteeing that each rupee saved will support your future financial expansion. You may start a systematic investment plan (SIP) now to put yourself on the path to long-term success, whether your goal is financial independence, retirement, or your ideal home!
- Start Early: Your money has more time to grow the earlier you invest. Pick the Correct Fund Choose mutual funds according to your financial objectives and risk tolerance.
- Remain Consistent: Even modest investments made on a regular basis contribute to wealth accumulation.
- Top-up SIP Contributions: For better returns, raise your SIP amount as your income rises.Remain Invested for the Long Term to optimize the advantages of compounding, refrain from taking early withdrawals.
Personal health insurance a must
Rising medical costs and healthcare inflation have made health insurance a vital financial safeguard. A single medical emergency can wipe out years of savings, which makes health insurance simply indispensable.
While employer-provided health insurance may offer some protection, it may be insufficient or lapse upon retirement or job change. which ensures continuous protection and financial security against unexpected medical expenses
Do not ignore term life insurance
Life insurance serves as a vital financial safeguard, providing dependents with financial stability and security in the face of a sudden death. It ensures that the family’s primary breadwinner’s income is replaced, maintaining their standard of living. According to Jain, term insurance is the most economical option, offering significant coverage at relatively low premiums, making it a more attractive choice compared to the costly endowment or unit-linked insurance plans.
Old vs new tax regime: Evaluate which one is right for you
1. Old Tax Rule Benefits:
- Beneficial for tax payers with incomes of over Rs 24 lakh, deductions of over Rs 8 lakh.
- Post Budget 2025, useful primarily for those who claim HRA.
- Flexibility: Salaried employees can switch between regimes every year.
2. New Tax Rule Benefits:
- No tax on incomes of up to Rs 12 lakhs.
- Lower tax rates, simplified structure.
- Higher basic exemption limit, wider tax slabs benefit all income brackets
