Tax Saving Options

It’s that time of the year where most of us run to save tax, as our organizations ask us to submit proof.

The most popular section for saving tax is Section 80C. Let us look at the various avenues available to us under this section. Remember that this section gives us deduction not only for investments but also expenses. The total amount allowed under this section is Rs. 1,50,000/-. Let us look at the options available:

• Principle amount of Home Loan: If you have been repaying your Home loan EMI’s, the principle amount of the home loan is eligible for deduction. Please note that the interest amount is allowed as a deduction under section 24 against income from house property. The amount of stamp duty and Registration fee is also allowed as deduction if a person has not taken a housing loan.
• Tuition Fee: This is allowed for only the tuition fee paid to any school, college or university for education of children. The maximum allowed is Rs. 1,00,000/- per child. You can claim exemption only for 2 children.
• Life Insurance Premium: Any premium paid for insuring your own life or that of your child or spouse is allowed as deduction. You have to ensure that the premium paid does not exceed 10% of the assured amount.
• PF: In case of salaried employees your own contribution to PF (compulsory or voluntary) is allowed as deduction.
• PPF: Any contribution to PPF is allowed as deduction.
• 5 Year Bank Fixed Deposits: The principle amount invested is allowed as deduction. Interest amount received is taxable.
• 5 year postal time deposit: This is similar to bank fixed deposit. Interest amount received is taxable.
• NSC: There are 2 types available 5 years and 10 years. Any investment is eligible for deduction. Interest amount received is taxable and also can be claimed under section 80C as investment, as interest is treated as reinvested.
• Senior Citizen Saving Scheme: investment in this scheme is allowed as deduction, but this is available only for those above the age of 55. Interest amount received is taxable.
• ELSS: any investment in this is available as deduction.  

Try and plan your tax saving wisely, if after doing any of the above, you exhausts you 80C limit, do not do any other investment under this section unless it is as per your financial goals.

If you have a housing loan, interest paid on housing loan to the extend of Rs. 2,50,000/- is allowed as deduction, under income from house property for self-occupied property.

Premium for health insurance is allowed as deduction under section 80D upto Rs. 15,000/- for self and family and Rs. 20,000/- for Sr. Citizens.

Make use of the options given to you and save tax. Tax saved is money earned.

Financial Goal Setting

We all have dreams, but most of us continue dreaming, whereas some of us convert their dreams into reality. Why is it that some of us manage to make our dreams a reality and others find it difficult? Simple. We try to find reasons or excuses why our dreams are difficult to be met. This is where we kill our dream. Then when we ask how was another person able to achieve his dream and we find reasons for his / her success. What if I tell you we all can meet our dreams and achieve it, if we want? I’ll give you some simple steps:

• First for every dream determine what the preconditions are, write them down. Don’t judge if it can be achieved or not, just write it down.
• Next check if there are any financial needs attached to achieve the dream. Some easy dreams which involve finance are financial freedom, retirement, child education, marriage, and house.
• Now once you determine that financial needs are attached, let us try to make them measureable. Put a figure against each dream.
• This step becomes much easier, now we need to decide where we invest to meet our financial dreams. This is a very important step, as this will tell you how much time you have to achieve your dream. Every investment option has a risk attached as well as the return. So depending on your risk appetite, your timeframe gets determined. If you feel that the timeframe is too high and you want to give up, meet a practicing financial planner. He will determine your risk appetite and give you a better idea on how to achieve your dreams.
• The financial planner would also be able to do the categorizations of your dreams into short, medium and long term, depending on your current wealth and income. As depending on the category of your dream, your investment need to be done accordingly. The Planner would also do proper diversification of investments, taking into account you tax bracket as well. We often forget the tax angle, your investments should be tax efficient.

These simple steps and your financial goal is set. Let me tell you, once your financial goal is set, all your other reasons and excuses disappear and your dreams become more achievable.