January 15th, Deadline by HR

Tax Saving

This is a usual scenario with all corporate employees in India, where in Dec one gets a mail from HR to submit tax saving proofs to avail tax saving benefits, given by the Tax department under various heads, key being 80C, 80D & section 24.

Confused, where to go, contradicting advice, & above all big Gyan by all on do’s & don’ts. Today I thought of writing something different, a guide to make you plan & execute same, which will not take more than 10 minutes of your time & easy to use.

I have divided this feature into three parts, where part one covers 80C, to avail exception for 1.5lacs, part two will cover 80D, to covers 0.35lacs & part three covers section 24, towards 2lacs.

In short, your investments amounting to 3.85lacs will attract no tax… if you plan well.

Part 1: How to cover 80C?

Through section 80C of Income tax department, one can invest 1.5lacs in various investments & can avail tax exception, & save almost 50k, in case you fall in the top tax bracket.

Key investments mentioned below, just follow 6 steps below:

  • Step 1: EPF (employee provident fund), write down your annual EPF deducted from your salary
  • Step 2: PPF (public provident fund), in case you have same, write down amount invested till date & future investment till 31st March 2015
  • Step 3: Home loan EMI, if you are paying home loan EMI, write down the annual principal payment amount (check the provisional certificate issued by your bank)
  • Step 4: Insurance premium, in case you have taken an insurance policy, write down amount paid or will pay by 31st March 2015
  • Step 5: FD for 5 years or Mutual fund ELSS, in case same invested, write down amount invested or will invest by 31st March 2015
  • Step 6: add up step 1 to 5 amounts:
    • If it’s more than 1.5lacs, you don’t have to invest further
    • If it’s below 1.5lacs & you have surplus in hand or can plan till 31st March 2015, one can look at further investments, based on risk appetite, where one should follow below order (in terms of priority):
      • Life cover/ term plan: In case you don’t have life cover or under cover, one should look at this immediately (thumb rule: cover value should include 10years of current expenses & liabilities in hand currently)
      • Investment based on your age & risk approach:
        • Conservative ( 50+ years): 30% equity & 70% debt
        • Balanced (35 to 50 years): 50% debt & 50% equity
        • Aggressive (up to 35 years): 70% equity & 30% debt
          • Debt instrument: PPF
          • Equity instrument: Mutual Fund ELSS

Part 2: How to cover 80D?

This is towards medical insurance premium. Please don’t confuse it with medical plans provided by your company, even though same will be part of your CTC. This is towards personal cover taken at your end strictly. If you have taken one, you can avail tax exception up to 15k & another 20k, if you include your parents.

In case you don’t have same, this is a must security feature, first from the fact that if you leave your job or switch jobs, who will cover that period? And secondly, covers given by corporates are very basic in nature, which may range between 1 to 4lacs, depending upon your seniority & CTC, whereas I don’t have to explain how much current hospitalisation costs?

Part 3: How to cover interest income (home loan EMI)?

Tax deduction under section 24, for the interest payment on loan for the residential property, where one can avail maximum deduction of Rs. 2, 00, 000/- for the interest payment.

Manoj Chahar
Founder & Storyteller at Moneyfrog.in
Manoj is the founder of Moneyfrog.in, with 15 years of corporate experience & expertise in financial markets. Manoj has corporate stints with Kotak Securities, IIFL group & Philips India. He holds an MBA (PGDM) degree from Symbiosis (SIMS) Pune.
His interests include birding & adventure activities.

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