How I Started My Tax Planning Journey at 20: Lessons from Confusion, Clarity, and ₹15K a Month
LSS, 80C, and the ₹15K Habit That Built My Financial Discipline.
The Alarm Bell I Almost Missed
It started over chai at a friend’s house.
"Have you filed your ITR yet?" my friend, Yashna, asked casually.
I blinked. "My what?"
That night, I Googled what ITR meant.
It turns out that anyone earning more than ₹2.5 lakh annually is legally required to file an Income Tax Return. I was earning ₹15,000 a month from my internship and freelance work, so that was ₹1.8 lakh a year. I didn’t need to file it yet, but that wasn’t the point.
The point was: I didn’t even know how taxes worked. And I was supposed to become a CFA?
That question led me to start my tax planning journey, not because I had to, but because I wanted to build discipline early.
Tax Basics I Wish Were Taught in School
I started from zero.
Here’s what I understood:
India taxes income under five heads: Salary, House Property, Capital Gains, Business/Profession, and Other Sources.
I was earning under Other Sources: freelancing, part-time work, and internship stipends.
If your income is under ₹2.5 lakh, you pay no tax (thanks to the basic exemption limit).
If it’s between ₹2.5 to ₹5 lakh, you can get a Section 87A rebate — basically making it tax-free with smart deductions.
Even though I wasn’t taxable yet, I learned how income slabs and deductions worked. I wanted to be prepared for when I would earn more. After all, tax planning works best when started before the income gets big.
My First Panic: The 80C Alphabet Soup
The first time I saw the phrase "80C Deduction" on a blog, I thought it was a government form.
Turns out, Section 80C is the holy grail of Indian tax planning.
Under it, you can reduce your taxable income by investing in specific instruments, up to a total of ₹1.5 lakh per year.
These include:
ELSS Mutual Funds
Public Provident Fund (PPF)
Life Insurance Premiums
Employee Provident Fund (EPF)
National Pension Scheme (NPS)
Tax-saving Fixed Deposits (FDs)
As a 20-year-old, I had neither a salary nor employer benefits. But what I did have was time and a willingness to save.
I started with ELSS funds because they had a low lock-in (3 years), potential for growth, and an SIP option. I began investing ₹500 a month — not for tax savings, but to build a habit.
This investment would not just reduce future taxable income, but also grow my wealth.
Understanding Regimes: Old vs New
In the Budget, the government introduced two tax regimes: the old regime (with deductions) and the new regime (lower rates, but no deductions).
The new one seemed attractive: lower rates! But when I calculated, I realized that the old regime still worked better for someone like me planning to use ELSS, insurance, and health premiums.
Moral: Always compare both regimes before filing your return.
Health Insurance – The Quiet Tax Saver
One weekend, my cousin had a bike accident. The hospital bill: ₹1.25 lakh.
He had no insurance. My uncle paid from his savings.
That was the weekend I bought my first health insurance policy.
Premium: ₹4,800/year. Benefit: Tax deduction under Section 80D up to ₹25,000 for self/family.
If my parents were senior citizens, the limit would be ₹50,000. If I paid for them, I could claim that too.
This wasn’t just about tax-saving. It was risk protection and future-proofing.
Exploring Bonds, NPS, and the Oddballs
While exploring more options, I stumbled upon:
Tax-free bonds (NHAI, PFC): great for safety, but not useful for deduction under 80C.
NPS (Section 80CCD): Good if you want to build a retirement corpus. Gives extra ₹50,000 deduction over and above 80C.
NSC, PPF: Traditional but low liquidity.
I parked some money into PPF (₹500/month). Why?
Guaranteed return
Triple E (Exempt, Exempt, Exempt) status
Long-term safety net
Mistakes I Made and Lessons I Learned
I made rookie mistakes:
Thought tax filing and tax saving were the same
Considered buying ULIPs for deduction (thankfully didn't)
Almost missed the PPF cut-off for the financial year
But each mistake taught me:
Start early, even if income is low
Don’t blindly chase deductions; understand the product
File returns even if income is below taxable limits. It builds your financial credibility
Tax Harvesting and Advanced Tricks
Later, I learned about Tax Loss Harvesting:
Sell losing stocks before the year ends
Book the loss to offset other capital gains
Buy them again if you still believe in them
Also, Interest Stripping in bonds:
Buy a tax-free bond
Sell post-interest payout at a lower price
Show capital loss (usable against gains)
Enjoy tax-free interest
It’s legal. Smart. But you must be cautious.
Tools I Use to Track Taxes
Excel sheet: Income, deductions, investments
Income Tax India Portal: For filing ITR
ClearTax / Quicko: For simulations
Google Calendar: Reminders for PPF/ELSS deadlines
The Bigger Picture
Tax planning isn’t just about saving money. It’s about building habits. It’s about learning how the system works so you can use it to your advantage.
I may only earn ₹15,000 now, but I’m preparing for the day I earn ₹1.5 lakh a month.
Because tax, when unplanned, is a penalty. When planned, it’s a reward.
My Checklist for Beginners
If you’re in your early 20s like me:
Start tracking your income (freelance, internship, gifts, everything)
File your ITR even if you don’t have to
Learn Section 80C and 80D
Begin an ELSS SIP of any amount
Open a PPF account for long-term compounding
Buy basic health insurance and term life if dependents exist
Explore NPS only when you have a stable job
Avoid ULIPs and complicated insurance plans
Set tax reminders in March to review
Always keep learning — the laws evolve, so should you
This journey has made me more confident, more informed, and more prepared for the future.
Here are some insightful videos and podcasts that break down Income Tax and smart tax planning strategies—perfect for anyone looking to understand and optimize their taxes.
If you're reading this and wondering if you're late to tax planning, the best time to start was yesterday. The next best time? Right now.