How to Save Maximum Income Tax in 2020-21? - YouTube

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Namashkar, my name is Mukul, and welcome to Asset Yogi

Friends, March is going on

This is the month when we do the investment and tax planning of the current and upcoming financial year

Because we have so many options, we are very much confused

There's no such video or Blog which tells us how to save maximum tax

So in this video, we'll discuss how to save maximum tax

There will be old and new tax slabs in the upcoming financial year

On which I did a detailed video so please watch it

So we'll see what are the options to save maximum tax in both

And in the end, we'll talk about an app through which you can do all the investments at a time in one place

So stay tuned with this video

Firstly, let's discuss the old Vs new tax slab

In the current financial year 2019-20, only the old tax slab is applicable

Under this, we can avail all the investment options under section 80 C, section 24, section 10

We'll discuss these soon

But the tax slab should you choose in the upcoming financial year 2020-21, depends on your income

So broadly, you need to understand that

If we can claim more deductions or can do more investments like took a home loan or paying rent

So if all these deductions are more in your case, then the old tax structure is better

especially for those who are in the higher income bracket

Secondly, tax slabs selected especially by the salaried class can change it next year

But if you are a business owner, the tax slab selected will be applicable next year as well

So once you selected, whether new or old tax structure

The next question arises that how to save our maximum tax

Firstly, let's talk about the new tax structure because it is very simple

In this, you don't have many tax saving options except one which is NPS (National Pension System)

There's only one benefit in the new tax structure which is claiming deductions for salaried employees

under Sec 80 CCD 2

That means you will get a tax rebate on whatever your employer contributes to NPS

And limit depends on your salary, which means up to 10% on your basic salary + dearness allowance

You can claim up to that much NPS money

It is only possible if your company gives choice to restructure your salary

Then definitely you can claim it

Otherwise, it is compulsory in government organisations

Some money is deducted which is added in NPS through the employer

You'll keep getting tax deductions in that

Now let's talk about the old tax structure.

If you follow the old tax structure and claim more deductions

Then definitely you should follow the old tax structure because you'll save high tax in it.

So let's see how we can save maximum tax step by step if we follow the old tax structure

We'll discuss apart from standard deduction which is Rs. 50,000 because anyone can claim

Step 1 is HRA which is House Rent Allowance.

The maximum savings are done here because it depends on your rent and salary.

The income tax department didn't imposed any limit.

It depends on your salary and the rent you pay

So if your salary is high and you pay high rent, then you can claim very high HRA

And how much HRA can you claim? I did a video on this so you can watch it

Now let me give you a bonus tip

If you live with your parents, you can pay rent to them

Pay rent every month in their account and file their tax returns

Now let's come to Step 2 which is home loan tax deduction.

I kept it in step 2 because here also we can claim good tax deductions of up to Rs. 5 lakhs.

How? Let's understand

Principal repayment is covered under Section 80 C whose overall limit is Rs. 1.5 lakhs.

Let's say you didn't invested anywhere else and you only took home loan,

And if you do principal repayment of more than Rs. 1.5 lakhs in a year, you can claim it under section 80C

And may be, you don't need to invest anywhere else

Now let's talk about the interest component

Interest component is covered under section 24

It contains an overall claiming limit

If you have a self-occupied property in which you live and if you took home a loan for it

Then you will get deduction on interest of home loan up to Rs. 2 lakhs in 1 financial year

Let's say you rented out the property on which you took home loan

Or if not rented but not living there

Then it is considered as deemed let out

That you have to include its rent in your income

Let's say you get income from rent and you're paying some interest

Then overall it is a loss.

Let's say interest is more than rent

Then you can claim the loss from the property up to Rs. 2 lakhs in a year under section 24

So this was our interest component

You get an additional deduction if you purchased a house under affordable housing

in the financial year 2019-20 whose value is less than Rs. 45 lakhs

This is the definition of affordable housing

That its overall value should be less than Rs. 45 lakhs

And if you took a home loan in financial 2019-20

Then you will get an additional deduction of Rs. 1.5 lakhs

Over and above the Rs. 2 lakhs deduction under section 24 which is covered under section 80 EEA

Let me give you another bonus tip

If you took a joint home loan

So if there are Co-borrowers and both file tax

Then both can separately claim their tax deductions

If you want information in detail, then you can watch my video on 'Home loan tax benefits'

Now let's come to our Step 3 which is tax saved from education loan

If you borrowed an education loan for higher education

If you're doing any course after class 12 and you took education loan for it

Then you can claim its interest component under tax deductions

And there's no limit to it, you can claim all the interest you paid

Whether you're studying in India or abroad

And you can borrow this education loan either for your children, your spouse, or for yourself

And you can claim these deductions up to 8 years

So we saw these 3 steps and once these are covered,

Now maybe you didn't took education loan, home loan and the overall tax deductions are not complete

Then comes our final step which is section 80C and 80D

That what types of investments can we do and save taxes

There are many options and I'll quickly discuss the summary of each

We'll go step by step and firstly, we'll cover categories in which you don't need to do extra investment

For example, EPF (Employee Provident Fund) is deducted in the case of salaried employees

Which is covered under section 80C

In that, you get good returns of 8-9% and that too non-taxable

So it becomes a good component for tax savings

But it is a retirement product. Hence you cannot withdraw it early

You can only withdraw it if you left your job and you are jobless for some time then you can withdraw EPF

Otherwise, you get it at the time of retirement.

And I made individual videos on all these products so you can watch those for more details

The next component is the Home loan Principal which is covered under section 80 C

And let me repeat once again that the overall limit of section 80C is up to Rs. 1.5 lakhs

So sometimes product is sold to you in the name of tax saving

So if tax savings of Rs. 1.5 lakhs is done then see that product independently

that how good are the overall returns and you should not buy it because of tax savings

So we discussed home loan principal, EPF in which you don't need any extra investment

There's one more component in which you don't need extra investment

which is the school/college tuition fee that is covered under section 80C

So this was the first category

Now let's talk about the next category which is insurance.

Buying insurance is very important for all of us,

First of all, let's talk about life insurance

In this, you should buy term insurance because we should not mix insurance and investment

And returns are very less like 5-6% in the endowment plans of life insurance

So instead of buying products that mix insurance and investments,

It's better to buy only term insurance

And you can cover the premium paid under section 80C

And invest the rest of the amount in mutual funds, stocks, real estate wherever you like

The next category under 80 C which I would like to cover is NPS (National Pension System)

It is relatively a new scheme in which if you invest, your money is invested into stock markets

So returns are high here.

And let's see in which clauses, you get tax benefits

So you can definitely invest in NPS under the limit of Rs. 1.5 lakhs in section 80C

Besides this, you can claim an additional deduction of Rs. 50,000

On top of these 2,

Under 80 CCD 2, if your employer gives an option to restructure your salary

so you can invest money in NPS through your employer

So you can claim the money invested by the employer which is 10% of basic + dearness allowance

And 80 CCD 2 is the only part that is available in the new tax slab also

But in NPS, understand that it is a retirement product and you cannot withdraw money in between

But you can expect good returns of 12-13%

Now the next category under 80 C is ELSS which I like

ELSS stands for Equity-linked saving scheme

These are tax-saving mutual funds.

In this, if you invested in ELSS, your money will be invested in the stock market

But here you have a lock-in period.

You cannot withdraw money before 3 years

So I like ELSS because if you'll see in 80 C, the least lock-in period is in ELSS which is 3 years.

And at the same time, you get returns like mutual funds

Let's say if you got 13-14% returns from mutual funds + Tax savings. Hence, returns are very good

If we talk about the post-tax returns

Besides this, long term capital gains tax is applied on ELSS like on mutual funds nowadays

But it is applied only when the gains from mutual funds or stock market are more than Rs. 1 lakhs/year

So there are very few people who have long-term capital gains of more than Rs. 1 lakh

from stock markets or mutual funds.

So then only the tax will be applicable and that too of 10%

So overall these schemes are pretty good and you can plan to invest in them.

Now the final category is Fixed income deposits where we get fixed returns

Lets one by one cover the returns under this and start from where we get better returns

Sukanya Samriddhi Scheme is a very good scheme where we get fixed returns

Fixed interest is promised

You get returns of 8-9% plus it is tax-free so there's no tax on returns

But here, your money is locked and you can only withdraw after your daughter turns 21 years old.

But if you have a daughter, then it is a very good scheme under section 80C

Now the 2nd category is PPF and VPF

PPF means Public Provident Fund and VPF means Voluntary Provident Fund.

Many people don't have the option of EPF or if they have, then also many people want to invest in PPF

Returns of PPF are non-taxable and you get good returns of 8-9%

And because they are non-taxable, this becomes a good option

But here also, your money is locked for 15 years and you can only withdraw a partial amount in emergency

In Fixed income deposits, there are many more options like Post office deposit,

National saving certificates, Senior citizen deposits, or there are tax saving FD's which last for 5 years

In all these, there is a 5 years lock-in so you cannot withdraw before that

otherwise, tax deductions are reversed.

But let me tell you that in all these, the returns are fixed but they are taxable

So if 7% returns are promised and you fall into the 30% tax bracket

Then calculate 30% of 7%, effectively you'll get 5% returns

So all these were the options of 80C

Now let's talk about section 80D

In which we get deduction on health insurance as well

You can claim tax deductions of Rs. 50,000 - 1 lakhs

If you buy health insurance for yourself or your family members

So health insurance is also very important which you should definitely buy it

After life insurance, I would prefer to buy health insurance as well.

So we can also do tax savings apart from these 4 steps

Let's say you donated somewhere and that is tax-deductible then you can claim it under section 80G

And if you went through any medical treatment for any disability or emergency

Then that is also covered under some sections on which I did a detailed video

But anyone can save a good amount of tax through these 4 steps

And now the question arises that how to do maximum tax saving under 80D and 80C

So there's a great app for this

You can use the ET Money app where you get all the tax-saving options

What I liked about the ET Money app is that all the tax-saving options are covered in one place

There's no paperwork involved so you can do everything online at home

And you can even save tax up to Rs. 78,000 because we can do everything in one place

So do check out ET Money app

So in this video, I tried to explain step by step that how we can save maximum tax

And I told category wise that which should you target first

So I hope you liked this video

and maybe many of your family members or friends might be doing tax planning for 2019-20 and 2020-21

So share this video with them and press the like button if you liked it

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Till then keep learning, keep earning, and as always stay happy.