Help! Rs 38K income tax on 8.8L CTC (50 yrs old middle class man)
One of my uncles (50 years old) has to pay Rs 37K tax every year, he is the sole earner in his family, he is a very simple and honest middle class man trying to provide for his family, is there any way that he can save that tax? They live paycheck to paycheck, As the tax amount is a lot for him, pls help with what can be done? I’ve seen people who earn hell lot more paying 0 taxes, pls help Home EMI= Rs 25K per month Family members= 6 (Wife, 2 daughters, Parents) No Mutual fund SIP, no health insurance, no knowledge of how to save taxes
GreatWhine
Stealth
8 months ago
Hey @overthinker, this is the only answer you need. no need for any new investments or anything.
income tax can be avoided if the net taxable income is less than 5 lakhs.
I'm adding the pointers that can help.
1. total CTC is 8.8 lacs. So, we require deductions of 3.3 lacs.
2. standard deduction - 50k, makes it 2.8 lacs
3. the next big deduction possible is interest on home loan emi. since it's 25k per month, he'll pay 3 lacs in emi annually. Assuming min 50% of that as interest, he can use 1.5 lacs as deduction using 80EE and 80EEA (max 2L). this brings the required deduction from 2.8 lacs to 1.3 lacs
4. the last one is section 80C, where he can claim any PF contributions. if not, the home loan principal can also be used. this a/c to our calculation is the remaining 1.5 lacs principal of EMIs. this brings that 1.3lacs to -20000.
5. if some issues with home loan calculation, it can vary by 20-30%, and you can use the kids education fees in 80c.
5. so, overall we can get the taxable income below 5lacs and can pay 0 tax.
Good luck. reply here if you need more help. I've added all sections also for your reference.
overthinker
Student
8 months ago
Thank you so much for this 😭
Just wanted to confirm home loan principal can also be used in deductions?
GreatWhine
Stealth
8 months ago
yes. it can be used as part of 80C. but do remember that you can claim a total of 1.5 lacs under 80C.
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Whatsinthename
Stealth
8 months ago
Follow the old regime.
For 8.8L CTC , the tax should be almost Nil.
Ask him to show deductions under 80C, 80D , NPS , show HRA (some documentation required)
BiryaniEnthu
Stealth
8 months ago
38k is too much on that CTC
Is he availing the deductions? Hope he has not switched to new regime
overthinker
Student
8 months ago
Yeah it’s really too much,
No, he has only used Home loan EMI but that isn’t enough, could you please tell the deductions that he can use? Like Tax saver MF, health insurance what else can be done?
Pls tell which regime to follow
Gems_Bond
Stealth
8 months ago
How much money can he save each month after meeting the expenses?
overthinker
Student
8 months ago
None, everything goes into expenses and EMI, as the salary is very low and no of dependents is high, and no other financial support
Gems_Bond
Stealth
8 months ago
Check this tool dude, maybe of some help - https://www.zoho.com/in/payroll/income-tax-calculator/
If you don't get enough suggestions here, will advise you to spend some 1-2k and get professional suggestion from a CA.
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Old regime
Standard deduction:50k
Tuition fees of his daughter's and pf can be added under 80C.
Home loan Interest paid till 1.5lakhs under 80EEA.
So it will come under 7lakh and tax will be zero.
overthinker
Student
8 months ago
Thanks a lot
Ravan
Stealth
8 months ago
8.8 lacs CTC means around 73 k as monthly ctc .
1) PF- 80C - 5K keeping it low not to take away in hand cash
2) HRA- 14.5k show on paper. No pan or other details required of landlord if rent is less than 15k.
3) Standard deduction 80k annual means 6.6k monthly
4) Home loan EMI- 25K full can be knocked off from ctc in 80C and interest payout 80EE
5) assuming 1.5 lac in 80c still not breached as most of emi is interest payout, put additional 5k per month of children education school/college fee under 80c
This will make this monthly taxable income at 13k which is less than 2.5lacs and so he will fall in 0% tax bracket.
Hope this helps.
I think your home loan calculation is inaccurate.
Afaik the deduction is only on the interest part of the loan not principal
Paintballsy
Stealth
8 months ago
Isn't PAN required on 1LPA rent? How you getting this 15k?
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Qwerty2398
Stealth
8 months ago
I can feel the pain this person is facing. Imagine paying 38k as taxes, being sole bread winner, no medical insurance and with current inflation. Farmers who earn the same money get tax free. Doctors who earn 3 times more go tax free. It's a curse to be a salaried employee in this country.
GeneralZod
Stealth
8 months ago
Check out 'My Tax' app
Since there is no scope for any other investment, best option will be to contact CA pay him 1-2k and he will suggest ways to save those 37k
Borosil_Carrier
Stealth
8 months ago
Donate 2-2.5 lakhs to a charitable trust and get 95% back in cash 😊
TalkNinja
Student
8 months ago
first of all ask him to have health insurance.
Find other sources of income if possible...in free time.
Do his daughters pursue education?
admiN
Stealth
8 months ago
ELSS - 3 year lockin
PF - 8 years lock in
NPS - lockin till retirement
insurance - lost money
The best option is ELSS. It will also help him generate some quick wealth as ELSS are high risk but good return investment. The only catch is that he must max out the rebate of 1.5L which means investing 12.5k per month.
StartupMinion
Stealth
8 months ago
Tution fees of his children can be claimed
overthinker
Student
8 months ago
Thank you everyone for helping out!
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