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Business News/ Money / Calculators/  The learning curve
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The learning curve

Mint Money spoke to five individuals who shared their tax saving story

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With most tax payers, tax saving is a process that starts only after they face an issue with it. From late bloomers, to those who didn’t know their exemption limits, we have all been there. Here are the experiences of five individuals—Satyaraj Sudhakaran, Rahul Jain, Ashwani Nanda, Harshad Bhanushali and U. Rajkumar—who shared their tax saving stories with Mint Money.

Satyaraj Sudhakaran, 41, category manager

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Abhijit Bhatlekar/Mint

Mumbai-based Satyaraj Sudhakaran, 41, category manager with Avenue Supermarts Ltd, started tax planning only after he got married in 2007, even though he was earning even at 21. “Earlier I used to think, let the government take tax to build infrastructure. So, I never made any effort to save on tax. I used to get tax benefit only on Employees’ Provident Fund, which was by default," he said. But after his family expanded, he realised the importance of investments. “I have a term plan, an endowment plan and a Ulip (unit-linked insurance plan). I invested in the endowment plan and Ulip through an agent eight years ago. It was only later that I got to know about term plans, and realised that they were cost effective and a must," said Sudhakaran. He also has a medical cover for his family, apart from his company insurance. For his daughter Navya, 8, he plans to invest in Sukanya Samriddhi Account Yojana—a small savings scheme for a girl child—from 2016-17. His investments now are based on information he gathers from reading.

—Vivina Vishwanathan

Rahul Jain, 35, marketing and communications professional

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Aniruddha Chowdhury/Mint

Like many tax payers, Rahul Jain, 35, a marketing and communications professional in Mumbai, doesn’t know all the provisions in the income tax laws. “After New Year celebrations, many working professionals like me wake up suddenly in January after seeing a big cut in our salaries, due to ignorance of tax planning. This is exactly what happened to me as well. I immediately called up my chartered accountant (CA)," he said. The CA advised him on an investment that Jain didn’t know about—the National Pension System (NPS). “He asked me to invest under section 80CCD of the income-tax Act to the tune of 50,000 in NPS, which could help me save an additional 16,000 (he is in the 30% tax bracket)," said Jain. “I have been using the services of a CA for more than 12 years now. It’s a small cost but you can be sure you are doing it right. In fact, my earlier tax refund (for 2008-09) is pending with the tax authorities and my CA is helping me recover it." Jain has been more disciplined in maintaining a file of tax returns since the beginning of his career.

—Kavya Balaji

Ashwani Nanda, 33, banker

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Ramesh Pathania/Mint

Noida-based banker Ashwani Nanda, 33, spreads his investments across asset classes. Currently, his investment portfolio includes mutual funds (including equity-linked savings schemes or ELSS), life insurance policy, Public Provident Fund (PPF), fixed deposit (FD), recurring deposit (RD) and bonds. “Both my wife and I invest regularly through systematic investment plans (SIPs) and also invest a fixed amount monthly in an RD," he said. “When we are able to accumulate some extra funds, we invest in PPF or FD in lump sum." Apart from these, their tax-saving instruments also include Employees’ Provident Fund (EPF). However, Nanda is not clear about the proportion of equity and debt in their portfolio and most of their investments have been arbitrary. “Though we invest regularly throughout the year, none of our investments is directed towards a specific goal," said Nanda. But now with a one-year-old son, the couple has decided to set goals and streamline investments from 2016-17.

—Ashwini Kumar Sharma

Harshad Bhanushali, 36, runs an educational training and tutorial centre

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A doctor by qualification, Harshad Bhanushali started earning at the age of 22. In those days he gave little thought to tax planning. “I would start thinking about it only towards the end of the financial year, and as a result, I looked for products where execution was easy," he said. But eventually, Bhanushali realised that this wasn’t a clever approach and made a conscious effort to become more knowledgeable about tax saving. At 36 years, he now runs a successful educational training and tutorial centre in Mumbai, and has streamlined his tax planning. “I stick to term plans for insurance and feel that using equity-linked savings schemes for section 80C tax saving is more efficient." He covers deductions under section 80D with a suitable medical policy. He also realised that fees paid for his children’s education and amount donated can be used for deductions. The home loan that he has taken jointly with his wife is used for tax planning. Bhanushali now confidently speaks about tax-saving as he made an effort to understand the nuances.

—Lisa Pallavi Barbora

U. Rajkumar, 34, assistant vice-president at a foreign bank

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Nathan/Mint

U. Rajkumar, 34, no longer worries about meeting his section 80C limit. “Employees’ Provident Fund contributions exhaust most of it." Rajkumar, who joined the banking sector in 2014 and works as an assistant vice-president at a foreign bank, says the biggest mistake that people (including him) make is to not look at the various exemptions in their salaries. “Avail all the exemptions. For instance, I didn’t consider housing rent allowance (HRA) until 2011. I upgraded to a larger rented house but didn’t benefit completely from the HRA exemption because I didn’t understand it. If your rent is 50-60% of your basic salary, you benefit the most," he said. In terms of 80C investments, he used to focus on buying insurance only. “While I always had an LIC plan, I started a unit-linked insurance plan (Ulip) in 2008 and another one in 2010," he said. Rajkumar believes that the Ulips will deliver good returns and thus does not want to surrender them. “But I have diversified and I also have mutual funds in my portfolio now. It’s no longer about tax-saving."

—Deepti Bhaskaran

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Published: 24 Jan 2016, 11:46 PM IST
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