overthinker

Student

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

10mo ago

GreatWhine

Stealth9mo

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.

total CTC is 8.8 lacs. So, we require deductions of 3.3 lacs.
standard deduction - 50k, makes it 2.8 lacs
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
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.
if some issues with home loan calculation, it can vary by 20-30%, and you can use the kids education fees in 80c.
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

Student9mo

Thank you so much for this 😭 Just wanted to confirm home loan principal can also be used in deductions?

GreatWhine

Stealth9mo

yes. it can be used as part of 80C. but do remember that you can claim a total of 1.5 lacs under 80C.

Ravan

Stealth10mo

8.8 lacs CTC means around 73 k as monthly ctc .

PF- 80C - 5K keeping it low not to take away in hand cash
HRA- 14.5k show on paper. No pan or other details required of landlord if rent is less than 15k.
Standard deduction 80k annual means 6.6k monthly
Home loan EMI- 25K full can be knocked off from ctc in 80C and interest payout 80EE
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.

CouchPotato

Amazon10mo

I think your home loan calculation is inaccurate. Afaik the deduction is only on the interest part of the loan not principal

Paintballsy

Stealth10mo

Isn't PAN required on 1LPA rent? How you getting this 15k?

BiryaniEnthu

Stealth10mo

38k is too much on that CTC Is he availing the deductions? Hope he has not switched to new regime

overthinker

Student10mo

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

Whatsinthename

Stealth10mo

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)

Gems_Bond

Stealth10mo

How much money can he save each month after meeting the expenses?

overthinker

Student10mo

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

Stealth10mo

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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