Some would say December is, end of the year – good, bad, worst or phenomenal it is still coming to an end. So we make resolutions which are broken before the first week of January ends. It is not so much a matter of mental resilience to pull us through our resolutions but we need a sharp jolt to awaken us and do what needs to be done.
March gives us this much needed push. It’s the time to file taxes. We don’t remember how many times we have been to fancy restaurants but a penalty for, let’s say, littering stays with us, isn’t it? Being taxed is not a very different feeling right?
We must save what we can and Invest. Saving and not investing is akin to buying a cycle and never riding it although gives us a sense of satisfaction that we might one day. Typically the Sun never seems to rise for that “one day”
Since Financial Year 2019-20 is about to end, and return filing process will be started soon from April 2020. Would you like to start now?
Have listed some ways where anyone and everyone who is having some income can plan and Invest. These essential Tips are a complete overview of how the “Working” can achieve “Independence”
Tip # 1:- Ignorance is not bliss, knowledge is
Section 80C try and read it. We know how difficult it is to read through financial jargons and cryptic language which could well be written in Mandarin or Latin, however, with patient skimming useful information will appear. This is arguably the biggest Section in Income Tax and with good reason for your Economic-Self to maximize take-home salary, legally “reduce” income tax rate with decreased tax pay-outs. Most of the tax saving tips for salaried employees will be apparent from it.
Tip # 2:- And from 80C the most important figure that pops out is Rs.1,50,000
That’s the total amount one can save from their annual salary – From being taxed. Now this can be leveraged with the range of options like Insurance, PPF (Public Provident Fund) NSC (National Sales Certificate) Mutual Funds and so on.
Tip # 3:- Goals
What you earn, what your expenses are, dependents, dreams, contingencies, et cetera are best known to you. Investment Goals are needed simply to narrow down commitment. What is your risk appetite? Material dreams or otherwise, something tangible needs to be focused on.
Tip # 4: – First Address basic needs
Life Insurance, Employee Provident Fund (If your employer qualifies for the same) Tuition Fees and such, deduct these from the 1,50,000 first.
Tip # 5:- Then comes Second Rung options
Tax-Saving Mutual Funds and ULIPS (Unit-Linked Insurance Plans) are the adventurous bets while PPF and NSC are low on risk, but as they say, “The Biggest Risk is not taking any Risk”
Pension Plan: Should you choose the Pension Plan, under Sub-Section 80CCC of 80C, pension plans are eligible for tax benefits.
Contribution to the New Pension Scheme (NPS) under sub-section 80CCD also qualify for Tax Benefits
Tip # 6:- Home Loan?
If availed a Home Loan, claim Tax Benefits by furnishing Proof-of-Principal repayment on the home loan, moreover, claim tax benefits under Section 24 towards interest payment on Home Loan.
Tip # 7:- Other Sections are important too
When it comes to tax planning there are other sections which can help save quite a bit on taxes. We have listed the documents individuals will need to submit and avail Tax benefits under the sections:-
1. Rent receipts to claim HRA tax benefit
2. Medical bills to claim tax-free medical allowance
3. Proof of travel to claim leave travel allowance (LTA) tax benefit – usually twice in a block of four years
4. Proof of conveyance, if required by company guidelines, to claim conveyance allowance
5. Premium receipt of health insurance/mediclaim, including premium paid on parents’ health insurance – Section 80D
6. Statement of education loan with details of the interest component – Section 80E
7. Proof of donation to a recognized charity under Section 80G
Tip # 8 Get in touch
Maybe, all of this can be overwhelming, it’s perfectly understandable. Would it be better if someone can provide expert advice and handle investment too? A lot of professional advice is available on the Internet so you can decide what, how and where you’d like to invest and get an expert to handle the same for you.
Don’t wait. Good luck!
(Republished with Amendments)