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Taxes – Last Minute Check

by | Mar 14, 2018 | Finance, Taxes

Though this applies to every tax payer, it is aimed at the young ones who are in the 5 – 6 lac salary range.

The time to plan tax saving investments is at the starting of the year – in the first week of April. However, quite a few realize that some tax breaks were missed out in June of the next year – whilst filing the returns!

This is a brief outline of the tax breaks still available for this financial year.

For anyone to miss out the first Rs.1,50,000 tax break under section 80C is nothing short of criminal negligence

Here is a list of common options to invest in for taking the 1,50,000 tax break under 80C along with my comments.

• Investment in PPF
One of the best things to do if you are less than 40 or so (my opinion). If you are investing in PPF for retirement, then the money invested has 20 years to earn interest and grow tax free. The only small savings scheme that I would recommend.

• Life Insurance Premium Payment.
Though this deduction is the most comonly taken, if you have a policy and have no ‘dependents’, this is one of the worst investments to make. If the investment is in ULIPs, then it makes it even worse. Consider getting out of these even at a loss. If you have dependents, then the only life insurance policy that makes sense is a ‘Term’ plan.

• Children’s Tuition Fee.

• Stamp duty on home purchase
If you are one of those smart ones that have purchased a house in this financial year, then the stamp duty paid on the registration of the house is eligible for 80C exemption

• Principal Repayment of home loan
Though this deduction is available, it should be availed of only if the house is for self use, not on a ‘investment’ property as the property needs to be held for 5 years if this exemption is taken.

• Sukanya Samridhi Account
If you have a girl child less than 10 years old, I strongly recommend you open this account for her. It is a really good investment.

• Five year FD scheme.
This is for a five year FD in a bank. I consider FDs as probably the worst investment – other than the senior citizen scheme. In this case, please note that you will get exemption for depositing in the scheme, but the interest received is not tax free.

• Senior Citizen’s Savings Scheme
Should invest.

• ELSS (Equity Linked Savings Scheme)
Probably the best mode of investment for tax savings. There is a 3 year lock in and most of the ELSS Mutual Funds are diversified funds, which, in a way reduce the risk of investing in the stock market.
These are the most common deductions to claim.

No money to invest for claiming these deductions?

Here are a few options:

• Borrow from your parents. What are parents for?

• If you have any other investments, it makes financial sense to take out the money from there and invest in tax saving investments as you get a 10% (at the least) returns immediately!

• If you already have money invested in tax saving schemes and the investments have finished the lock in period, you can withdraw that money and again invest in tax saving schemes (even the same one)!

In addition to the above, one MUST have a mediclaim policy. The premium paid for this policy is tax deductible up to Rs.25,000 under section 80D.

Again if you are the smart one and have invested in a house and been even smarter and taken a loan for it, the interest paid on the loan is deductible under Section 80EE upto Rs.2 lacs per year.

Conveyance allowance – Rs.1600 per month or 19,200 per year is exempted.

Medical reimbursement – Upto Rs.15,000 per year in medical expenses – medicines, check ups, etc can be reimbursed by your employer tax free. The trick is to get the employer to show Rs.15,000 as ‘medical expense reimbursement’. You get the exemption for the amount that you have bills for and the rest becomes taxable.

We are brought up hearing – “Only two things are guaranteed in life – death and taxes!”

So, we tend to just pay up with a feeling that it is inevitable. However, if you consider that taxes is the second biggest expenditure in life (after a house), it becomes extremely important to study the tax laws and find ways to take maximum advantage of them.

Happy investing!

Niranjan Bangera


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Written By: niranjan

Financially Stupid Niranjan


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