Leverage Tax Relief to Speed Up Building Rs 1 Cr Corpus

On 01 February 2024 when the Union Budget was scheduled to be presented by Finance Minister, Nirmala Sitharaman, the middle class glued to the television in anticipation of ‘what’s in’ for them.

‘Hon’ble Speaker I present the budget for FY 25-26, this budget continues our government’s effort to accelerate growth, secure inclusive development, invigorate private sector investments, uplift household sentiments and enhance spending power of India’s rising middle class, says Sitharaman amid noise and resistance in the Parliament.

The opening speech made one thing categorical that there’s indeed ‘something in’ for the middle-class in the digital tablet encased in a red ‘bahi-khata’ pouch. The budget speech goes on addressing agricultural, MSMEs, Defence, Transport, Energy sectors making the middle-class impatient and nervous. “I am now happy to announce that there will be no Income Tax payable up to income of 12 lakh rupees,” gathering applause from the members of parliament as the Finance Minister eventually heard the voice of the tax laden middle-class.

Analysts debate starts simplifying what tax benefits mean in the new tax regime, consumption stocks rally, while the middle-class starts to plan where to deploy the extra savings. The new tax regime offered a ‘no direct tax’ benefit to all the salaried employees with an annual income of up to Rs 12 lakh.

Where to utilise Tax Benefit?
Every middle-class person has this dream of building a huge corpus which could generate a decent passive income, provide financial liberty, pay-off their debts and so on. Well, building a corpus of 1 crore rupees is still a financial goal for many.

How To Smartly Build Rs 1 Cr Corpus with Income Tax Benefit?
Although there are multiple routes to build the humongous corpus of Rs 1 crore, the income tax benefit provided in the budget will passively contribute towards your goal without any extra effort.

Considering that the majority of the tax-paying salaried middle class does not have the income of Rs 12 lakh per annum, but they are certainly going to save some amount of taxes in the new tax regime and utilise that amount for themselves.

It is estimated that a salaried person with the income of upto Rs 12 lakh per annum will save upto Rs 80,000. Let’s calculate with a simple rule of 14:14:40.

Consider yourself being a young man at an age of 25-26 and you have automated your investments to systematically invest Rs 15 thousand per month, after 14 years with the compounded annual growth rate (CAGR) of 14% you will get close to Rs 80 lakh at the age of 40.

Now suppose, you increase your SIP to Rs 20,000 per month due to passive saving of Rs 5,000 through tax benefit, the same calculation of 14% CAGR in 14 years will give you more than Rs 1 crore (precisely Rs 1,04,39,080) at the age of 40.

Step-up SIPs, increasing income, increasing revenue streams are added benefits.

However, to get a clear path to achieve this goal depending on your age, expected returns and the dedication to save, MINTIT, can certainly help you strategise this goal with the opinion of experienced professionals. MINTIT, India’s leading personal finance service, provides tailored solutions to achieve your financial milestones.

What It Means to Have Rs 1 Cr Corpus?
Folks, imagine yourself retiring with the enormous ‘financially liberating’ corpus of Rs 100 crore. A fund which is inflation proof, which will give you and your dear ones the peaceful sleep at night. We are not done imagining, now imagine having a corpus of Rs 100 crore giving you the liberation of financial freedom and relocation to your favourite city and pursuing things which you have always wanted to.

Yes, such kind of imaginations do come true when you save and invest with discipline under the professional guidance. Building Rs 1 crore is always challenging but once you achieve that, the next Rs 1 crore only takes 4 years to double and if you run the math, you get Rs 100 crore in 30 years with 14% CAGR without investing a single penny afterwards.

Yes! The power of Compounding, but you need to start earliest as they say, the best time to plant a tree was 30 years ago, the second best time is now.