Madam, where is your Form 16?” The nerdy-looking accounts guy at the office was looking at me impatiently. All I could respond was, “What on earth is that?” with eyes bigger than a surprised raccoon. He looked appalled.
“Don’t you file your tax returns?” I could see him trying to hide a smirk, but the corners of his lips gave him away. My ignorance of the finance world had given me away again. I was the laughing stock of the department.
That was three years ago. Today, I’m still no smarter about money – mostly because, as a 20-something journalist living on rent in Mumbai, I have none. Obviously, my boss thinks this makes great fodder for a story – so I’m dispatched to meet financial experts and hope their advice makes sense to a Zara-wearing, bistro-loving, party-hopping spender. It’s a hell of a ride.
I meet Siddesh Damble, my father’s friend’s chartered accountant, a bespectacled old man hidden behind racks of paperwork. “I only have 10 minutes,” he says, looking grim – so much for the patient approach. “The first thing you need to do is withdraw money from your salary account because it is getting stale there.” I ask why, and he produces a smirk that is now all too familiar. “Because money in your salary account barely appreciates. Play with it a little – fix it, invest it, and grow it.” I nod like a bobble head but I’m still clueless so I ask him to elaborate. Damble grumbles but complies: “The safest thing for girls in your income bracket [by which he means bottom-rung and always broke] to do is open a fixed deposit account with your mother. Your money has the potential to grow at say eight per cent. Plus, since it’s fixed for a certain number of years, it’s just like saving,” he says. And roping in a parent means you won’t cash out in a hurry.
Just as it’s starting to make sense, Damble throws in this whopper: “Invest your cash for gold. So when you sell it later, you will definitely make more money than what you invested.”
Great, so to make money I need to buy gold, for which I need money, which I don’t have. Arrgh! Why don’t Zara skirts appreciate the same way? I’d be so rich!
Clearly I need more help, so I meet Gyanender Singh, a former army officer and financial analyst. This time, things get even more complicated. Singh gets to the point in five minutes. “First claim your HRA and therefore claim a deduction on it. If you’re self-employed and do not have HRA, you can still claim deductions under Section 80GG,” he says.
“Better still, if you are staying with your parents, pay them rent and avail tax deductions. That way the money stays in the house and you save on tax.” So, wait. I can pay my parents rent, use my House Rent Allowance to reduce my taxes, and charm my folks into letting me keep the rent money too? Why has nobody told me this before?
Singh also advises me to declare my losses on a tax return to save more tax in the future. “Just make sure that you set off your losses against profits in the current year. Suppose you sell your real estate property for Rs 20 lakh. That means you will pay Rs 2 lakh in tax. Now, if you’ve made a loss of Rs 4 lakh in stocks, you set this loss against your profit and pay tax on R6 lakh. That way you save a cool Rs 80,000.” He’s lost me. I have no house to sell, no profits to declare and no stocks to… what do you do with stocks anyway?
But I realise that investing is not rocket science. That starting early is half the battle won. And that it’s possible to put money away and put it to work for me. Now if only they gave me a raise so I could actually have some money to put away…
Get help now
Most people feel that only rich businessmen and real estate honchos need chartered accountants. But everyone needs a CA. Here’s why: They’re not scared of paperwork. They’ll file your tax returns that you have been too lazy to file.
If you end up blowing all your cash on poker one evening, they’ll make sure you’re still left with something.
They’ll tell you if you can afford a mansion or studio apartment in five years based on how much you earn today.
How to hide it in the mattress
Sacrifice a good night’s sleep. The fact that you’re close to your secret crores is more comforting
From HT Brunch, December 9
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