Immediate to medium-term financial planning

Over the years, there has been an uptick in Indian consumers’ spending habits. From Millennials to Gen Z, there's a growing desire for new experiences, a serious attitude toward hobbies, and an aspiration for a better life overall. 

This has led to a surge in the market of financial tools that help people decide how much to save, spend, or splurge. 

The markets were running high for the past 2 to 3 years from 2021 to the start of 2024, however, the last 18 to 20 months have made us take a hard look at the bull run with the geopolitical scenario. 

Trends that were once soaring are now being questioned, and the consumer sentiment has reached an all-time low. 

In this article, we will share how to manage & work on our short to medium-term goals, typically ranging from 1 to 5 years. This can range from planning a holiday to buying a vehicle. 

Type of Funds 

• A debt fund is a type of mutual fund that invests primarily in fixed-income instruments such as government securities (G-Secs), corporate bonds, treasury bills, commercial papers, certificates of deposit, etc.

  • Benefits: lower risk than equity but better returns than FDs, can be withdrawn faster than an FD, and is a good form of investment for a few months to 3-5 years. Works well for short-term investment. If held for 3+ years, you get indexation benefits on capital gains.

• Hybrid funds are mutual funds that invest in a mix of equity (stocks) and debt (bonds). Think of them as the best of both worlds – they aim to provide growth through equities and stability through debt.

  • Benefits - for those who are new to investing, have a medium risk appetite, are planning to buy a house in 5 years, or build a retirement corpus,  diversified across assets. Think of investing for 3 to 5+ years 

• Index funds are a type of mutual fund or ETF (Exchange Traded Fund) that mirrors a specific stock market index like the Nifty 50, Sensex, or Nifty Next 50. It passively tracks the index, meaning it invests in the same companies in the same proportion as the index.

  • Benefits - long-term market growth, results are better received in 5+ years, focused on building a corpus, ideal for SIPs & beginners

Tax Implications and Exit Charges

While investing for short - medium term goals, its crucial to factor in the tax implications and exit load to ensure the goal amount is fully met.

Debt Fund -> Capital Gains are taxable as per your income slab. Exit loads maybe applicable for short duration redemtpions of less than 6 months.

Hybrid Funds -> Upto 1.25L per year of capital gain is tax free. Most of the funds have an exit load of 1% if amount is redeemed within 1 year of investment.

Index Funds -> Upto 1.25L per year of capital gain is tax free. Most of the funds have no exit load.

Ready to plan your next goal? Use TrueX goal planner or connect with our advisor 

Zero tax up to ₹14 lakh for salaried professionals

Earning upto ₹12.75 Lakh

Under the new FY 2025-26 tax regime, you can earn up to ₹12.75 lakh without paying any taxes. But what if you're earning ₹13-15 lakhs? Strategic tax planning can still save you thousands, without complex investments. Here's your roadmap to smart tax savings.

The New Tax Regime(FY 2025–26)

The new tax regime offers significant benefits, including:

• Enhanced standard deduction of ₹75,000 (up from ₹50,000)

• Zero tax up to ₹12.75 lakh (thanks to rebates and standard deduction)

• Marginal relief for incomes slightly above ₹12 lakh

Here is the tax slab -

What If You Earn ₹13 Lakh?

Here is how you can minimize your tax liability:

Without Tax Planning:

• Gross Salary: ₹13,00,000

• Standard Deduction: ₹75,000

• Taxable Income: ₹12,25,000

• Tax without Marginal Relief:

  • 0% on first ₹4 lakh = ₹0

  • 5% on next ₹4 lakh = ₹20,000

  • 10% on next ₹4 lakh = ₹40,000

  • 15% on ₹25,000 = ₹3,750

  • Total = ₹63,750

With Marginal Relief:

• Excess over ₹12 lakh = ₹25,000

• Due to marginal relief, the tax is capped at ₹25,000

• With 4% cess: ₹26,000

Tax Saved: ₹37,750

Use TrueX Tax Planner to calculate your taxes

You can further reduce the taxes to 0 by investing in Employer NPS as explained below:

What If You Earn ₹14 Lakh?

For higher earners at ₹14 lakh, the situation looks even better if structured smartly.

Calculations:

• Basic + DA = 70% of Gross = ₹9,80,000

• Employer NPS (14% of Basic+DA): ₹1,37,200 (fully tax-free under Section 80CCD(2))

• Standard Deduction: ₹75,000

Taxable Income = ₹14,00,000 − ₹1,37,200 − ₹75,000 = ₹11,87,800

Tax Payable:

• Since taxable income < ₹12,00,000, zero tax due to rebate provided under the new tax regime. Final Tax Payable = ₹0

Tax Saved = ₹81,900

Use TrueX Tax Planner to calculate your taxes

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FAQ

Marginal Relief for Salaried Employees (New Tax Regime, FY 2025-26)

Marginal relief is a tax benefit designed to ensure that employees whose income slightly exceeds the ₹12 lakh threshold (where the enhanced rebate applies) do not pay disproportionately higher taxes.

Who Benefits?

• Salaried employees with taxable income just above ₹12L (e.g., due to bonuses or raises).

How to Claim It?

• Automatically applied when filing ITR (no separate form).

Top 3 Tax-Saving Strategies

A. Leverage Employer’s NPS Contribution

• How?

  • Employer contributes 10%/14% of (Basic + DA) to your NPS (tax-free under Section 80CCD(2)).

Example: If your Basic + DA = ₹14,00,000:

• Private sector employee: Max deduction = ₹1,96,000 under 80CCD(2) (14% of ₹14,00,000)

B. Claim Marginal Relief

• What qualifies?

  • Taxable income between ₹12L–₹12.75L.

• Benefit: Tax capped at an amount exceeding ₹12L.

  • Example: ₹ 12.25 L income post standard deduction of ₹75000. → pay only ₹25,000 tax (vs. ₹63,750 without relief).

C. Optimize Allowances

• Utilise Conveyance Allowance for reducing taxable income

  
  

  Use TrueX Tax Planner to calculate your taxes

  
  

Tax Planning leading to Financial Security

Ayaan

32-year-old professional earning ₹25+ lakh per year

Concerns: Tax Saving

Ayaan had some investments in LIC and PPF but wasn’t sure if he was fully maximizing his tax-saving opportunities.

As we began discussing tax-saving strategies, we suggested Ayaan to consider health insurance coverage for his family. Initially, Ayaan thought his employer’s medical policy covered his mother. However, after some probing and detailed conversation, we discovered that his company’s insurance only covered employees, not their dependents—meaning his mother had no medical insurance.

Without this coverage, a medical emergency could significantly burden Ayaan and his brothers, risking their savings.

TrueX Advice

1. Health Insurance for Ayaan’s Mother

We explained the financial risks of not having medical insurance and immediately helped Ayaan secure a comprehensive health policy for his mother. Our focus included:

• Hospital Coverage: Since his mother lived in a remote town and frequently visited his sister, we ensured the policy covered hospitals in both locations.

• PED Add on : Diabetes was a pre existing disease which Ayaan's mother had. After comparing various plans, we selected one offering pre existing disease coverage from day 1 ensuring no claims are rejected.

• Tax Benefits: Upto 50k of health insurance premium was eligible for tax deduction in old regime.

2. Fixing Gaps in Ayaan’s Tax Planning

Once his mother’s insurance was covered, we focused on improving his tax planning.

Key changes included:

• Maximizing Section 80C: Ayaan wasn’t utilizing his home loan principal repayment under the ₹1.5 lakh deduction limit. By factoring this in, he reduced his taxable income.

• Correcting Interest Deductions: We identified a miscalculation in his home loan interest, which had caused a higher tax liability. After correction, Ayaan could claim the full deduction under Section 24(b).

• Additional Deductions: We uncovered other eligible deductions Ayaan had missed, including NPS contributions (80CCD), which further reduced his taxable income.

The Impact

Through a deep dive into Ayaan’s financial portfolio, we:

• Secured comprehensive health insurance coverage for Ayaan’s mother ensuring financial security against rising medical expenses.

• Reduced tax payments by maximizing deductions

• Started building Retirement Corpus through annual NPS investments

Ayaan came to us seeking tax planning advice, but by taking a holistic approach, not only his taxes got optimised but also his family’s financial future became secured.

Are you looking to optimize your tax benefits, secure health insurance for your loved ones, and create a long-term financial roadmap?

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