Few months ago, I started running Ask Us page & TFL readers are asking their queries there and finding solutions. I am also doing query sections for Business Bhaskar & Indian Express and have faced quite a good number of tough questions, but this question from Mr. Srinivas made me nervous. He asked about “How to Save Maximum Tax” but he smartly covered every tax saving instrument in his mail itself.
So this time I thought why not I ask this question to TFL readers – they may add few more points from their practical experience where one can save tax.
Mr Srinivas’s Mail – How to Save Maximum Tax
How ever way we do the tax savings all will come to the following list only.
1 lac in 80C + 20 K in Infra Bonds + 15 K in Medical Insurance + 1.5 L of Home loan Interest
Pl. suggest if there are any other savings which are over & above this for a male employee. Not a senior citizen. I don’t have any disable dependents. Please don’t include parents and company car loan adjustments etc..
Basically what I am looking is any pension / Insurance / savings for kid (which may give them after their 18 Years or my death) schemes which are over and above that 80C slab in which I can contribute for 15/20 (or lifelong which will be eligible for my kids after my death) years and the amount contributed is not considered in the Taxable amount now.
Hasn’t he asked me a DREAM Question? Actually he is right when he says that tax saving just revolves around Sec 80C, Mediclaim, Infrastructure bonds and Home Loan. When I take look what Income Tax department intentions are, it is clear that any how they want to maximize the tax collections (they also have a boss and targets 😉 ). Every year they make some and take some, leaving the common man confuse about whether they should pay all tax or save tax. Kudos Srinivas you have a very valid question.
Read this before going further – “Year End Tax Planning” where we have shared all legitimate tax saving tools from 80 C & Beyond 80 C.
This reminds of my school age when I was asked to write “If you were the Prime Minister of India” or “If someone gives you a chance to be Finance Minister of India for one day”, can you solve this problem. But we are not Anil Kapoor of Nayak or Mr India and we have to choose from what we have been given.
Random Points that came to my mind:
1) We have to think beyond 80C as it is already having so many instruments & best one are ELSS (Equity Linked Saving Scheme) & PPF.
2) Sec 80G, which allows deductions from taxable income for the amount donated to specified charitable trusts. Oh! But Srinivas never mean that.
3) House Rent Allowance (HRA) benefit – I think he will be already using this. (If he is eligible)
4) Interest payment on second home loan which is rented but for that he need capital + home prices are too steep to consider investment in it.
5) Other options which will not help on immediate basis
a. Amount can be gifted to major children but from Srinivas question it seems kids are still in early age.
b. Creation of HUF
c. Creation of Trust – Since most of our investments gives Tax free returns so there’s no point creating a trust also. (But it can be really helpful after DTC)
Last point that I would like to add here is there is difference between Tax Saving, Tax Avoidance & Tax Evasion – we are here talking about Tax Saving.
So I am now leaving this question for readers to brain storm – the floors are open and let’s help Srinivas and make this an interesting discussion. And with Srinivas, may be we can help each other also from this.