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Understand tax planning and its loan benefits

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Despite the meticulous planning the March month brings with it a shortage of cash flow to nearly everyone. Of course, the reason is the tax deduction from the income in March. New finance budgets coming in and changes in tax slabs make the situation even more intricate. Although it doesn’t affect your past year’s tax computation, it is important to understand all the details to plan well in future to save tax. If you are planning to build or renovate a house, your children are expected to move out for their further studies, marriage or travels are planned or for any other reason; If you need a personal loan in the FY-2023-24 dig in to know the important facts. 

Budget Highlights in Terms of Finance or Credit

  • Expected economic growth at 7% despite global slowdown
  • Focus on encouraging women’s economic empowerment
  • Rebate of Rs.50,000 on interest paid on the loan based on its end use

Benefits of Tech-Based Financing Infrastructure

  1. Technical and economic growth: The finance minister Mrs Nirmala Sitharaman emphasized the technical development of the society and economy at large. Developing technical infrastructure will boost the economy by increasing the reach of the financial sector to the common people. For everyone to avail the benefit of numerous policies as well it’s crucial. 
  2. Transparent and fair lending process: The use of technology also ensures a transparent lending system. Since it opens up all the loan and financing-related terms and conditions along with benefits and charges, taking informed decisions is possible. Many rebates and promotional financing schemes keep on coming throughout the year. To know them and avail of their benefits is possible using the e-financing facilities. 
  3. Versatile lender and loan options: With the inception of and boom in e-commerce almost every bank and NBFC are now available online. The presence of many lenders leads you to have many choices of them. Based on your preferences and requirement you can choose a provider and get your financial aid. Also, you can check all the possible financial or lending policies along with their features. The awareness can help you in negotiating a better loan deal. 
  4. Supports the Green Growth motive: The finance minister announces the “LiFE” vision for a green lifestyle, green growth and technology leadership along with many other such plans. It induces the idea of reducing the generation of garbage and promoting eco-friendly practices. With online lending 100% paperwork is eliminated and taking a loan is possible without any harm to the planet or environment. 
  5. Strengthening financial growth: E-commerce has already catalyzed financial growth around the world. With the launch of a new budget in India for FY-2023-24, many pro-online schemes are announced. With their cultivation and usage, the economy will grow further by increasing the spending capacity of people. It also works for infusing liquidity in the market and raising the lifestyle in India.  

Despite launching Green Growth programs and promoting technological growth lending business is mainly need-based. People often borrow in financial crises rather than for boosting liquidity. Need-driven loans can be ideal but lifestyle changes and more money comes into circulation when the needs are created. To understand this better, let’s know how loans or borrowing credit can improvise tax planning.

A line of credit is a credit limit approved on your account out of which you can spend the money as you need. Unlike a personal loan where the interest is levied on the lumpsum approved, in a credit line it’s calculated only on the used portion of the credit limit. The approval on the credit limit is given for a particular period and you can renew the same after repayment to keep using the same credit support.

How a Line of Credit can Support Tax Planning? 

  1. Aids your additional expenses: Tax deduction as source (TDS) is a system where you pay a portion of the total tax payable right away after your salary is credited. You can estimate the total tax for a year on your income and choose an increased TDS. It will help you plan a better budget. During the closure of a financial year, you can file for the income tax return for the extra payment you made if any. You must not worry about how to meet additional expenses with salary after deduction. A line of credit can make a revolving credit support for you. You can keep on meeting additional financial needs out of your approved credit limit. Repayment is possible in chunks as suitable to you. The gist is you can prepay your tax, plan a good budget and still would meet all the expenses efficiently. 
  2. Supports savings and investments: Savings and investments are what we all want to do. In the age of financial insecurities and growing needs, it has become a must rather than an option. Unfortunately, our financial planning handles the first attack as soon as we have some emergency cash needs. Mostly everyone tends to break it with the hope to start over in future without realizing the vicious cycle of financial needs. To break this cycle, it’s crucial to choose additional financial support that we can repay over time. A line of credit can support this motive by maintaining continuous credit support. For all the additional financial needs you can choose it over and over and keep repaying as possible for you. 
  3. Opens up your credit history: The credit history reflects the current financial position of the borrower considering income and past loans. It tells about your creditworthiness and ability to repay the loan. When you take the first loan there happens to be no credit history hence approval on a loan takes time. But using a credit line opens up your credit history and regular repayment makes it clear and healthy. In future, if you borrow another bigger loan it can lead to instant approval on your personal loan. 

With a growing economy and India being the leading country financial system keep on rolling. It brings small yet significant changes in the taxation system as well. Understanding these changes and planning well for the income and tax payments are crucial. This write-up has discussed all the relevant changes the tax system has brought this year for an individual. Knowing them and understanding the relevance of tax planning with respect to financial goals can help to achieve them without hassle.