I am 25 and live in Kolkata with Rs 6 lakh CTC. What is the best tax saving option for me and how can I have a tax efficient investment for my goals?

Raunak

Advice for Raunak

Your present expenses should ideally be one-third of present earnings. If you can curtail your expenses to 1/3rd of present net income in hand after tax, you will have surplus of approximately Rs 30,000 a month.

Insurance
Take health insurance immediately as any medical emergency can wipe out any savings. Likewise, take term insurance before you get married. The premiums you pay will be eligible for tax benefits under Section 80D and Section 80C respectively. The premiums towards these two policies will work to about Rs 12,000 annually.

Car purchase
You should invest Rs 6,500 in a liquid fund every month for a year for the down payment of your car and take a car loan to fund the car with a threeyear loan so that you can be debt free with the car loan by 2020. The EMI on a car loan of Rs 3.2 lakh for three years will be Rs 10,000 a month.

Home purchase
You should invest Rs 10,500, divided equally into three different funds each month—short-term debt, income and a balanced fund to build a corpus for the down-payment for your house. Assuming you will have 10 per cent salary growth every year for the next five years, the SIP portfolio built this way will be a corpus of Rs 4 lakh down payment for your home. The balance for the house will come by way of a home loan.
Additionally, you should be looking at investing for your retirement as it is never too early to start. Given your age, you will benefit from the magic of compounding. After all with the suggested investments, you will be left with a surplus of Rs 12,000 a month, which you should ideally invest in ELSS schemes. The move will ensure that your annual income tax reduces from Rs 37,451 to Rs 13,000, which means an extra cash inflow of Rs 2,000 a month due to lower TDS.

olmdesk@outlookindia.com