Don’t lax, pay your tax

Momeys.. Bet your lists are going berserk with holiday season approaching. For a lot of us, travel would be on cards. A flurry of hosting to playing guests at weddings & parties will take up time. Add to that the pressure of turning out your best – a few salon visits & shopping trips – there goes any possible free time out of the window. But no one’s complaining. After all December is a time we all love waiting for.

Now having looked at literally the brighter side 😊, this post is to remind about the money that shouldn’t fall prey to taxes. We have seen from very close quarters, fellow momeys have heavily procrastinated, only to loose money to tax.

November-December can be busy time but it shouldn’t come at the cost of tax planning. For those in mid to high tax brackets, this is a great time to take stock. Here are simple steps to approach tax planning:

1. Calculate your year’s taxable income. For eg. If you have rental or interest income in addition, add it to your salary.

2. Determine your tax bracket

3. Check if you have any deductible investments like Home loan payments, life insurance, PF contribution, PPF etc. Under 80C, you can get tax deduction upto 1.5 lacs.

4. Check for any shortfall in the deduction limit of 1.5lacs. If the tax free investments are not totalling to 1.5 lacs, you need a tax plan.

5. Revisit your financial goals. If your money requirement will be soon, you will have to look at lesser tenure options.

6. You believe in No risk – No gain? Momeys if you want utmost safety of your capital, choose safe fixed income options like PPF or FD. If minor volatility doesn’t bother you, you can take some risks with market linked options like NSC, ELSS.

7. If youYou want higher returns, then zero down on NSC or ELSS. (ELSS would be our choice)

8. Save your investment proofs in a folder. While filing taxes, you will need the proofs handy so ensure you keep them easily locatable.

9. Invest because today is the best day. The sooner you finish tax planning and have your choices ready, go ahead and make a purchase. Often delay in investing leaves you in lurch when employer’s HR asks for proofs. For lack of proof, they deduct tax from salaries. You could totally avoid such rude shocks.
In the end, all we can say that is every money cautious person is taking stock of their tax liabilities ahead of the spending season . Are you too momey?

Are you over paying your home loan?

Moms you might just say, “Now that’s a rhetorical question. Of course we are over paying”. The pinch of Home Loans is so hard that it does appear as an over-paid debt. Especially because home loans are so long in duration compared to other loans like Car, Education or Personal loan. By simple estimates also, you pay double the loan amount back to your lender. This blog however is not the usual expensive home loan rant.

We recently visited the bank, for our KYC updation for a 2 year old home loan. It actually was a 2 minute process which required our signatures as per some newly introduced e-KYC rules. The loan account being least of our favourites, was hardly ever looked into, which led us to enquire about the on going rates. To our happy surprise, we WERE OVERPAYING INDEED. The rate of interest had reduced by a whole 1%. We found that bank does not automatically apply the reduced rate (which we were told at the time of availing the loan) and it required our instructions to do so.

Another learning that came out was that the rate reduction is not without a charge. We had to give a SWITCH OVER fee. To clarify the point, the current 9.55% rate was brought down to a new rate of 8.65% for a year. Post a year, if the rate of interest continued on a downward spiral then we could ask the bank to bring it down again.

The switch over fee was not transparent though, and we couldn’t ascertain the basis of calculation. But we could definitely see benefits of paying it one time and bringing down EMI for our balance 198 EMIs, saving a couple of lacs in the long term.

So as we sat back in the evening thinking through the day and reading some advice about managing a home loan, here came our take-outs:

1. Keep an eye on news about RBI’s Monetary Policy review meetings and even other news about interest rate changes.

2. Check the rate of interest with your lender periodically (atleast once a year)

3. If you are being charged for switching to lower rates, negotiate with the lender to pay as less as possible.

4. Use your bonuses, windfalls, big payments to pay the loan back. The earlier you are debt-free the better.

5. If you are foreclosing a part of your loan, ask the bank to reduce the tenure instead of the EMI.

6.  Two way tax benefits should be used – First, the interest component of the loan is eligible for deduction upto Rs. 2 lacs under section 24. Second, the principal repayment allows you deduction of upto Rs. 1.5 lacs under section 80C. To know more about tax benefits on home loans, you can see: https://cleartax.in/s/home-loan-tax-benefit

​Tax saving options for Women

Taxes are inevitable whether you are employed, partner in family business or an entrepreneur. Tax planning is important to ensure your earnings don’t suffer from heavy tax outgo-s, last minute rush or late filing penalties.
Moms, today we are sharing options for availing tax deductions so you make use of right options well in time and save up on taxes.
Tax Deduction
Section 80C of Income Tax Act allows for a deduction of up to Rs. 1,50,000 for investing in tax saving options. Two most known ones are Public Provident Fund and Employee Provident Fund. Let’s look at some other options.

5 year deposits: If you don’t want to take too much risk, invest in 5 year deposits with any bank or post office. You can’t get deductions upto Rs. 1.5 lacs under Section 80C. 
Sukanya Samridhi Yojana: For girl child below 10 years, SSY can be taken where you can deposit upto Rs. 1.5 lacs each year for a fixed return of 9.2%. The best part is both interest and maturity amounts come tax free. The lock in period is 11 years for this scheme till your daughter reaches 21 years of age.
ELSS: Equity Linked Savings Scheme give you tax exemption while giving you attractive returns. The fund is managed by professional managers so you don’t have to worry about market movements, ELSS have a lock in of 3 years.
Life Insurance: If you are a primary or an equal earner in the family, then you must consider getting a life cover through life insurance. The government allows for a max amount of Rs. 1.5 lakhs to be deducted annually for tax benefits.
National Pension Scheme: Working women who would like to save for retirement should consider NPS. There are 3 distinct profiles for you to map your risk profile: Equity, Corporate bonds, Government securities. The exemption you get for NPS cannot exceed Rs. 1.5 lacs annually.
Home Loan: Home loan repayments can get you tax deductions and in 2 ways. There is deduction allowed upto Rs. 1.5 lakhs in principle amount and upto Rs. 2 lakhs in interest repayment. You must make use of this even if you are a co-worker along with your husband.
Also find from local registrar office, if there is a stamp duty concession for women buyers, which is usually around 1-2%.

There could be a marginal rebate of .05% on home loans for women which should be checked with the lending bank.

Be a smart mom in saving your tax because Money Saved is Money Earned.