Ask Readers: How to Save Maximum Tax

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

Please clarify one question about Tax free savings.

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.

My Views:

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.

there is difference between Tax Saving, Tax Avoidance & Tax Evasion – we are here talking about Tax Saving


  1. Very innovative way to help readers.

    I don’t know the answer but I will ask few of my friends who are CAs to reply on this post.

    • Thanks Vipin.

      I used your idea & shared this post on different professional forums – hope to get some good reply.

  2. First of all thanks a lot for taking up my question to the next level and for the elaborated details given.

    If possible. Pl. explain on second Home loan details. How this can help us in saving the Tax. Pl. take an example so that it’s more clear.

    Pl. don’t consider the donations (100% tax free PM relief funds/Tsunami funds, 50% tax free temple donations etc.. ) as it’s may not serve the purpose. Don’t call me greedy, I mean, I am aware of them and trying to learn some new stuff, here.

    Pl. don’t suggest to start a new company and have a two tax accounts one for personal & one for company, and writing off some expenses in company A/C. It will be a separate topic altogether. You may take-up in your free time and through some light on that. I just came to know from a friend about this. don’t have many details as of now & would like to know about this. Thanks again & your help is highly appreciated.

    • Welcome Srinivas,

      Building new co. can’t come under tax saving – hope you understand what I am hinting.

      Vikas has solved your second home question.

  3. Dear
    You can have tax deduction benefits on the interest for second home. For self occupied home lone interest deduction is having restriction of Rs 1.5 Lakh but for second home this restriction is not applicable. Tax benefit is available for any number of property and is without any limit under specific circumstances.
    The income from house rent and interest paid on Lone is calculated separately for each property owned if such a calculation results in a loss it is allowed to be set of against your income form other heads
    How to calculate income from house property

    Rental income net of municipal taxes (annual value) = 20000

    Standard deduction at 30%of 20000 =6000

    Interest payable on home loan 100000

    Income from house property =20000-6000-100000= -86000

  4. Thanks a lot to Vikas for detailed explaination.

    What is the definition of second house? Let say, I am staying in Mumbai and have bought a house in Pune which is let out. Does this mean this is a second house? (and hence eleigible for beyond 1.5L intrest cap)

    Also if I have 2 home loans in 2 different metros, does it mean I can cliam benefits twice? If yes does it apply also for Capital Repayment of home loan? Is there any cap on amount?

    BTW capital repayment of housing loan is not mentioned in the tax saving options

  5. hi to all,
    i have two Q.
    Q 1.HOW will Direct tax code be implement over ELSS and other tax saving instrument?

    Q.2. I have got my first salary of 30000, how should one divide its salary so that he can able to built a desired corpus for himself, i am 25yrs of age and one dependent unmarried sister.
    Please help me asap!!!!!!!

    • Hi Raja,

      It’s good to hear that you got your first salary & started learning things.

      Regarding your first question – it is proposed that ELSS will not be tax saving instrument after DTC.

      Coming to second part – starting from age 25 if you divert 20-25% of your income to proper investments you can easily achieve all your goals. But my suggestion is as right now there are less expenses & responsibilities – try & save maximum that you can.

  6. My husband comes in income tax slab of 30%. How much maximum tax can be saved from income of 30,00,000/- p.a.

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