Tax Planning

For people having CTC over Rs. 6-6.5 Lakhs per annum & having a Floating Rate Housing Loan, the investment pattern suggested below would be quite useful.

Tips -

• Section 80C - (Max: Rs.1,00,000 for Males)

1. Check the Prinicpal component of your housing loan from the Provisional Tax Statement provided by your Housing loan provider. Let your Principle component be around Rs.70-80,000 per year. If you find it less, use an Amortization Chart & redesign your EMI.
2. Let your life insurance policy premium not exceed Rs.10-15,000 per year.
3. Leave the balance Rs.10,000 amount in the beginning of the year, so that if the interest rate on Housing loan changes, you can utilize this buffer amount. Remember, if the interest rate increases, the Principle component would decrease & Interest component would increase. And if the interest rate decreases, it would be vice versa.
4. In case of increase in interest rate, you can do a part pre-payment of your Principle component for the balance amount in Section 80C (max investment of Rs.1,00,000 for males). Before re-designing your EMI at the beginning of the year you have to do a what-if analysis of interest rates depending on market trends. (NOTE: It is beyond the scope of this article to explain in complete detail of doing a what-if analysis within an amortization chart)

• Section 24D - (Max: Rs,1,50,000)

1. This section would cover the Interest commponent of your housing loan & the investments here would vary based on interest rate changes. As already mentioned above you need to do a what-if analysis within the amortization chart which would give you maximum benefit under Section 80C & Section 24D.

• Section 80D - (Max: Rs.15,000 [Rs.20,000 for Senior Citizens])

1. Buy a Health Insurance Policy depending on whether you have Dependant Senior Citizens in your family. Go for a health insurance policy which gives you benefit of both Domiciliary & Hospitalization claims. With a premium of around Rs.20,000, you get domiciliary claim limit of around Rs.50,000 approximately & hospitalization coverage of around Rs.1-1.5 Lakhs.
2. With domiciliary claims you can claim the day to day doctors' expenses you incur on yours & your dependents' treatment (Medication for fever, etc.). This includes claims for both the Doctors' fees as well as medicines.

• Section 10 - (Max: Rs.15,000)

1. You could claim tax benefits on Medical Bills (day to day expenses) mentioned in the previous section.

• Food Coupons - (Max: Rs.30,000)

1. If your employer provides you the option to take part of the Salary as Food Coupons, do go for it, as you could do grocery purchases at many famous outlets using these food coupons. You can also use these food coupons at various hotels when you go out for partying.

There are various other options available for Tax Planning & this was just a small suggestion from my end to help you in saving more from you.

(DISCLAIMER: I am not a Tax Consultant. Please do your Tax & Investment planning after thorough study & guidance from a qualified Financial Consultant).