Death and Taxes are the only things which are certain in life.

There is nothing much which I can suggest on the first item – though if you are interested, it will be worth your while to look at Dr. Peter Diamandis and others on what they are doing for enhancing the quality and longevity of human beings.  If you subscribe to his Abundance newsletter it will give you insights into the kind of amazing work that’s going on in the areas of robotics, DNA research etc.

However coming back to taxes….this is the time of the year (April – July) in most countries when taxes have to be filed.

For service class people the biggest challenge is that the government takes away its “pound of flesh” even before we get the salary in our hands.  Depending on the tax brackets, generally the income tax rates are around 25-35% in most countries.  So for every $100  that you earn, the government has a right on $35 before you.  Which means the harder you work, the more your try to earn, the more you end up paying to the government.

Unlike a business person who is allowed a lot of expenses as tax deductible.  The employer has to deduct tax at source before paying the employee.  That’s kind of unfair for the employee.  Being an employee myself I completely sympathise with all my salaried brethren.

Having said that, we also have to take cognisance of the fact, that all the roads, hospitals, defence services that the government provides.  If we have to ensure prosperity and safety for all the people of the country then paying taxes is mandatory.  One of the big challenges for countries like India through history have been poor compliance to paying taxes.  That has resulted in us still being a poor country.

So we should ALWAYS ensure we pay taxes which are due.

For the employed the government in India does give avenues to do a tax deduction to plan for long term capital appreciation.  One of the things in this is the NPS( National Pension Scheme) in India. ( In the US I believe there are 401K plans) . Not only can you contribute about 10% of your basic income and get tax exemption, you can in addition contribute another Rs50000/-.  The biggest advantage of this scheme is that there is a very low management charge and you can decide to also invest a certain percentage in equity because of which you get the benefits of tax exemption as well as capital appreciation in the long term.

There is another avenue which you should look at exploiting and do good as well. The government wants you to help organisations which are doing good for the society.  When you showcase that you have contributed to a good cause you can also get a tax exemption.  Now that’s such a good idea….you do a good cause and the government supports you in doing good by giving you tax exemption.

There are many such things which the governments in India, US etc. give to help the salaried class reduce the tax liability.  I would sincerely suggest that you’ll take professional advice from a CA or CFA on how to bring down your tax liability as per what is legal.  But do not shy from giving taxes.

Now when you get the tax deduction, the money saved should be put into a bucket to help you achieve your dreams.  Over the long term these amounts aggregate to a very large  corpus to help you get closer to your dreams without breaking the bank.

Last time I had spoken of how I had gone about trying to achieve things from my bucket list.  You too can, by utilising the avenues given by the government, reduce your tax liability and then let that money compound.

Every person should have a bucket list to look forward to in life.  That’s what makes life interesting.  Let finances not stop you from living your life.  Plan things, use compounding to your advantage and take benefits given by the government to have life.

Till next time.

Carpe Diem!!!