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Do you want to save more in-hand cash from salary every month? Read.

Dear Indian taxpayers, the pandemic has been unmerciful to you. The year had been an unforgettable journey of grief and loss, on top of that economy has crumbled and hit hard on each one of us. Cash is in high demand right now, people are breaking their Fixed Deposits like never before. A report stated that around 159 districts in India have seen a spike in declining Fixed Deposits in banks. People require cash to sail through this never-ending waves of Covid-19.

In the current financial year, fresh lockdowns in several states have forced people to look out for directions to increase the monthly flow of in-hand money. Appropriate tax planning can help in that direction.

The pandemic has been brutal to the salaried class. Job losses and salary cuts for lakhs of employees apart from the deaths of the near and dear ones was a gift from the novel Coronavirus. The informal sector workers have been equally hit by the pandemic and subsequent lockdowns. The pandemic has simultaneously taught this generation the importance of in-hand cash.

Experts believe that this pandemic is a lesson for the salaried group to learn and they must start investing to create an emergency fund for such future pandemics.

Contingency investment must be done in liquid funds so that when in need, it can be withdrawn immediately. Experts suggest that the ideal amount of contingency fund should be six times the monthly salary.

CEO and founder of ClearTax, Mr Archit Gupta suggested that individuals should manage their investments and income to save taxes. This balance will leave them with more in-hand cash.

According to Mr Gupta, a person should start balancing his income and investments to save on taxes. Employers deduct the applicable taxes in advance from the monthly salaries paid to their employees. He suggested that an employee must calculate the total expected income for the financial year and invest in appropriate tax-saving investments if he desires his income to exceed the taxable limit.

He further suggested that an employee must choose investments that qualify for the Section 80C tax deduction up to an amount of Rs 1.5 lakh yearly, depending on the risk tolerance and investment objectives.

Salaried employees living in rented apartments can demand house rent allowance (HRA). The employee gets a tax deduction up to a certain amount based on some specific conditions. The employee can also save taxes on health insurance premiums under section 80D, and he/she is also qualified for a tax deduction on home loan interest up to 2 lakh yearly.

The employee must submit their tax-saving proof to HR on time, this will save them from TDS getting deducted from their monthly salary unnecessarily. This will leave more in-hand cash because the TDS will be deducted as per the employee’s tax-saving goals.

Founder of Mr Sujit Bangar said the best takeaway from the year 2020 is about disciplined investments, lack of which has caused financial distress and helplessness in 2020. It is believed that during a crisis, ‘cash is the king’. Mr Bangar suggests that an employee should start proper tax planning much before the starting of a financial year.

To maximize tax saving with minimum cash expenditure, thus increasing in-hand cash, an employee should follow the following principles suggested by experts. During the lockdown, these principles may come in handy.

  • Planning is the Key: An employee must plan his taxes during May/June. This will help him utilize a runway of 11-12 months for tax-efficient investments to have less crunch on cash flow.
  • Calculating is the saviour: It has been advised by the experts that the employee must keep track of how much tax has already been saved unknowingly by already done things like paying tuition fee for kids and other activities.

Other than the importance of cash in hand, the pandemic has also taught us the importance of health insurances. Income Tax Act has the provision of tax deduction under section 80D for health insurance premiums paid for self and members of the family. Therefore, in today’s world, living without suitable health insurance is an act of foolishness.

Edited by Aishwarya Ingle

Sanjana Simlai
Sanjana Simlai
Hey, this Sanjana. Am from Kolkata. Reading, writing and travelling have always attracted me. I am always ready to learn and look forward to opportunities that would enhance my career in Journalism. I spend my free time in clicking pictures with my Nikon DSLR and I find solace in poetry.
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