….. to plan your tax saving and execute it. Yes, that’s true. By the time you read this article, get down to planning and deciding which instruments to invest in and start off, it will be September. Then you have time till January to make those investments because come February, the HR folks are going to get behind you for producing proofs.
You already know what the the toughest part is. Not the planning or execution but actually getting down to it. It used to happen to me too. When I started working, I found the tax declaration form very intimidating. Not only was it long and complicated, it made me feel as though there were many avenues of saving but all I was doing was spending. It took me a couple of years to figure out that I didn’t have to put money into each of those investments and again a couple of years to figure out that only some investment avenues were suitable for me. So I’m going to highlight the sections applicable to most people to help you get started.
Sec 80C
Let’s look at Sec 80C first. Grab a pen and paper and answer these questions (Financial Year FY 19-20 refers to the period between April 1, 2019 and Mar 31, 2020)
A. Do you have children? If yes, do you pay school fees? If yes, note down the amount payable for FY 19-20
B. Do you have a home loan? If yes, ask your bank for a provisional principal repayment certificate for FY 19-20 and note that amount down.
C. Ask your HR for the EPF (Employee provident fund) amount that will be paid on your behalf for FY 19-20.
D. Do you already pay life insurance premium / tax saver mutual fund / any other tax saving investment? If yes, note the annual payment.
The maximum saving you can do under Sec 80C is Rs 1.50 lakhs. If you’ve put in money in any of the above, they are eligible for tax saving. Now total these amounts and deduct from Rs 1.50 lakhs. The derived amount is the maximum you can save under this section. Divide it by 5 (because you have 5 month left), choose an instrument you wish to invest in. stay away from ULIPs) and pay the amount every month from Sep to Jan.
Sec 80D
From here on, things get simple. Have you availed health insurance? If yes, note the premium amount. If any of your parents are covered under the policy and if one of their ages is above 60 years, you can claim up to Rs 50,000 premium paid for tax deduction. If the eldest member is less than 60 years of age, you can claim up to Rs 25,000.
Also note the cost of any preventive health check-up can be submitted for tax deduction up to Rs 5,000 total.
Sec 80E - Do you have an education loan? If yes, you can offset the interest cost for tax benefit.
Sec 24(B) - If you do have a housing loan, ask your bank for a provisional interest payment certificate for the FY. You can claim up to Rs 2.00 lakhs interest payment as tax deduction.
The above sections are the ones which are applicable to most people. Apart from these, if your answer is yes to any of the following, then you can claim tax benefits
Do you donate money?
Is anyone in your family including you) handicapped or availing medical treatment?
If you need a more detailed explanation, this article by Basavaraj Tonagatti is really goodhttps://www.basunivesh.com/2019/04/30/best-tax-saving-options-for-2019-20/
That’s it folks. Remember that investments need to be made for investment sake and not for tax saving. So choose the best instruments to invest, check for diversification and then see how it fits into your tax planning. If you want to discuss this further, drop us a line at mathewpravin@yahoo.com and we can have a chat to fine-tune your planning.
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