Today marks the last day of the financial year 2024-25—and probably the end of the Old Tax Regime’s attractiveness. Looking back, I recall writing a blog in 2017 about tax-saving options. Even then, I had proposed an idea: it is better to pay tax and invest in financial products based on actual needs rather than chasing tax breaks. Much has changed since then on the exemption, deduction and taxation fronts.
For years, tax-saving incentives dictated financial decisions. Life insurance was primarily seen as a tax-saving tool rather than a risk management product. Health insurance, while slightly better understood as a necessity, still carried the appeal of tax deductions. Many people took home loans not just to buy a house, but because the tax breaks made them financially attractive. Some managed their EMI-to-income ratio wisely, but many took on unnecessary loans just to reduce taxes—without considering the bigger financial picture.
A Mindset Shift for a New Tax Regime
From April 1st, the focus must shift from saving taxes to making purposeful financial choices. As the saying goes, “When the why is clear, the how becomes easy.”
- Life insurance should be bought to protect your family and your investments—not just for tax deductions.
- Health insurance should be a safeguard against medical emergencies, not just a way to reduce taxable income.
- Home loans should be taken because you want to live in that home, not just because they once offered tax benefits.
- Traditional life insurance policies may still hold value, especially for those in the highest tax bracket, looking to replace part of their debt portfolio or real estate investments with tax-free cash flows.
Think Like a CEO—Because You Are One
Imagine you are the CEO of a company. Your duty is to increase shareholder value and grow the company. To do this, you must deploy capital wisely.
Would you invest everything into new buildings, plants, and machinery? No. You’d keep cash for short-term needs like salaries, explore acquisitions, and balance long-term and short-term goals. There’s no one-size-fits-all answer. Every decision requires careful thought about risk, return, and sustainable growth.
Now, shift that thinking to your personal finances. You are the CEO of your family. Your family members are your shareholders, and your responsibility is to enrich their lives.
How will you deploy the money you earn?
- Will you invest everything into real estate, hoping for appreciation?
- Will you put all your money into fixed deposits, playing it completely safe?
- Will you invest in financial assets that generate steady, tax-efficient returns?
When we view money as capital to be deployed, rather than just income to be spent, we make better financial decisions. This mindset helps us focus on optimal returns, financial security, and overall well-being.
What Will You Do With Your Extra Savings?
Under the new tax regime, salaried individuals should check with their company’s accounts team to finalize their tax regime selection. For those earning up to ₹12 lakhs, rebates could reduce their tax liability to zero. Higher-income earners could save around ₹1 lakh annually.
The real question is: What will you do with this extra amount each month?
Will you spend it mindlessly, or will you deploy it wisely—just like a CEO would?
The choice is yours.
Prasad Patwardhan
VittaSiddhi
QPFP®
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