Can Your Tax Savings Buy A Valentine Gift?

(As Published in Economic Times on February 11, 2015)
Valentine’s Day is just two days away. What will you gift your beloved? Perhaps a diamond ring? Or a box of chocolates? Your choice will depend on how well you planned your finances during the year. If you were lazy and did not pay attention to your tax planning, the tax deducted from your salary would leave you with very little to spare on Valentine’s Day. Then a 500 gram box of chocolates is the only option open to you.
But if you were a careful tax planner who started saving tax from the very first month of the financial year, you could afford a diamond ring or something equally expensive. You don’t have to be an expert to save tax. Even someone with basic knowledge of arithmetic and tax rules can do it.
There are several reasons why salaried taxpayers end up paying more tax than they should. They are either not able to fully utilize the deductions available to them. Last year’s budget had raised the deduction under Section 80C to Rs 1.5 lakh a year. However, many taxpayers, especially the younger generation who earn well but blow it all away, find it difficult to take full advantage of this deduction.
Besides Sec 80C, there are other ways to save tax as well. A home loan is a very effective tax saving tool. Even if one is availing of tax exemption for house rent allowance, one can claim deduction for the interest paid on the home loan. Last year’s budget had hiked the home loan deduction limit to Rs 2 lakh a year. If the house is given out on rent, there is no limit to the tax deduction that can be claimed.
Some companies allow their employees to customize their compensation structure. If you belong to this lucky set, restructure your salary in a way that it becomes more tax friendly. Pack in more tax free allowances and opt for perks instead of cash payments.
Coming back to your Valentine’s Day plans, will you be able to give your beloved what you have planned? If not, resolve to be smart tax planner this year. Promise your partner that you will save tax and be able to afford an expensive gift next year. Set up a target for making tax saving investments every month. That way, you will not be burdened with a huge tax saving target at the end of the year.
For this year, if for some reason you have paid excess tax, there are ways to get it back quickly. If you file your returns early and correctly, you will get your refund faster. Remember, the excess tax you have paid is like an interest free loan to the government. The sooner you get it back the better it is for you.