Tax planning is an integral aspect of an individual’s personal finance, helping individuals reduce their tax liabilities and maximize their savings and spendings. While the end objective of any tax planning strategy is to save tax, these strategies could vary significantly depending on one’s age and financial situation. This article aims at simplifying some of the tax planning tips tailored as per different age groups for an individual resident in India:

Young Adults (20s to Early 30s)

1. Start Early with Tax-Saving Investments:

An individual may not have specific long-term goals in this age band and hence tax-saving investments should be targeted specifically towards retirement to get a heads-up for this very-long term goal.

• Public Provident Fund (PPF): Investing in PPF is a long-term commitment that offers tax benefits under Section 80C of the Income Tax Act. The interest earned and the maturity amount are tax-free.
• Equity-Linked Savings Scheme (ELSS): ELSS funds, offered by mutual funds, offer tax benefits under Section 80C and have a shorter lock-in period of three years compared to other 80C options. These are essentially equity funds and are targeted to help the investor benefit from the magic of compounding till his/ her retirement.

2. Education Loan Interest Deduction:

• Under Section 80E, you can claim a deduction on the interest paid on education loans. This deduction is available for a maximum of eight years or until the interest is fully paid, whichever is earlier, and can be claimed either by the parent who may have borrowed the money or the student (child) who starts repaying the loan with their earnings. There is no cap on the interest amount to be claimed.