Budget changes tax laws every year. Do you change to take full benefits?

You are waiting for the Budget 2021 for tax reliefs as if they are going to change your financial decisions. But the fact is very few actually understand correctly and remember the tax benefits given to taxpayers in past budgets. We do take financial decisions based more on emotions than financial logic. The same is with budget – instant comfort if tax slabs increase or discard if tax slabs tighten.

One can bring tax to ZERO on CTC of Rs 15 lakh by claiming existing tax exemptions and deduction. However, most of them would be paying lakh plus tax every year. This is because they are not ready to spend time and money for understanding and change their financial beliefs with expert guidance. A small businessman does consult an expert from the very beginning but salaried taxpayer leaves it to the company for his entire earning life — almost 35-40 years, generally.

There is no real tax pain because TDS gets deducted every month and common understanding gets developed that nothing much can be done.

You can acquire knowledge to take the right decisions for diverting your hard earned money into family’s financial wellness before letting it go to tax. Change is not easy in the beginning but it becomes so after you correct financial beliefs. For example NPS, home loan, medical insurance and education loan give significant tax benefits to ensure financial wellness but less than 25% salaried taxpayers avail these fully and prefer to pay tax.

Loss due to this lethargy and incorrect financial decision impacts their retirement corpus mostly and sometimes put them in financial crunch too especially when medical emergency happens. You do know that there is no guaranteed pension and retirement life would be almost 30 years for self and spouse each. Shouldn’t you divert tax to protect family with adequate risk cover, house EMIs and NPS contribution, thus building safe retirement corpus?

Waiting for the dream house and its dream price but losing 30% in taxes every year. Can’t you buy ready house as investment instead of dream house thus diverting tax and rentals into 30-50% EMI payment?

Keeping fund in saving, FD and over flowing 80C investments with insurance premium but not investing in NPS. Can’t you divert these funds for additional tax benefits and retirement corpus? Even investing in mutual fund before utilising the NPS is keeping your return 30% less because you are investing after TDS on salary.

There are no free lunches. Free and fast e-filing has saved time and money but has taken away the few minutes that one used to spend to have a look on the previous year tax outgo too. One should learn the impact on tax of each and every item in form 16, 26 AS to see which item is getting taxed and what the other tax free option are. Remember, you are ignoring it like blood pressure for 35-40 years! As BP is not painful but increases the other chances of heart attack, brain hemorrhage, etc. Similarly, TDS is painless but financial losses are threats to your achieving wellness and wealth.

Yes you are an intelligent and hard working person that’s why getting good salary. However, so far you have learned how to earn money and that too on your job, not tax and investment. We do recommend taking expert guidance with intent to change the way financial decisions should be taken from this budget onward and learn how to save and use of money.

You are waiting for the Budget 2021 for tax reliefs as if they are going to change your financial decision. But the fact is very few actually understand correctly and remember the tax benefits given to taxpayers in past budgets. We do take financial decisions more on emotion than financial logic, same with budget – instant comfort if tax slabs increases or discard if tax slabs tightens.

(The author is co-founder & CEO – Taxspanner.com. Views expressed are personal)