Analysis by ClearTax finds 90% of women not optimising tax savings; lack of awareness, liquidity at financial year end cited

Indian taxpayers, on an average, pay ₹20,000 per year more in taxes than they need to, an analysis by ClearTax has shown.

It has also found that 90% of women do not do the most they can to save taxes.

“What we have learnt is that on average, the taxpayers on our platform are missing out on savings of about ₹20,000 a year on taxes,” Archit Gupta, founder and CEO of ClearTax, said.

“That’s a lot of money that people are leaving on the table. They could have done tax saving investments or tax planning better and they would have not had to pay the extra ₹20,000 that they are.” “We also learnt that on a country-wide level, when the income crosses ₹7 lakh, less than 50% of the taxpayers avail of the maximum exemption they are eligible for under Section 80C,” Mr. Gupta added. “Below ₹7 lakh, we figured that people might not have enough savings to do this, but it was surprising to see that for those above ₹7 lakh, this was the case. This is reflecting from real data from millions of data points.”

He added that the analysis of taxpayer data also found that 90% of women do not optimise their tax savings.

Mr. Gupta pointed out that there were two main reasons for this — lack of awareness and lack of liquidity available at the end of the financial year.

“When we did surveys and analysis, one of the most common reasons for this was that taxes and exemptions are a complex topic for most people,” Mr. Gupta said. “The opacity and complexity of what to do, how much to do, meant people made some effort, but didn’t take it to the logical conclusion. They think that ‘oh, TDS has been cut, so there is nothing else I have to do’.”

The second reason, he said, was the lack of liquidity at the last moment.

“People wake up to the need to invest in these tax-saving instruments only when their employers ask for investment proofs, which is towards the end of the financial year,” Mr. Gupta explained.

“When they reach January, they have other liabilities and payments to make such as rent, etc., so if they have not planned through the year and squirrelled away small amounts through the year, then there is not enough liquidity to do the entire tax savings investments at the last minute,” he added. “So, they might be aware, but they don’t have the liquidity.”

To try to address this situation, Mr. Gupta said that his company had developed a free-to-use platform called ClearTax Invest that allows users to simply upload their payslip data, and then receive an artificial intelligence-powered recommendation of what investment instruments are available and advisable to save the most tax.

Investment proof

“The other part is, we also let you invest in tax-saving ELSS funds on our platform,” Mr. Gupta said. “You get an investment proof immediately. If you don’t have liquidity, you can start an ELSS SIP that allows you to make investments that are forward-looking, and not last-minute.”

According to Mr. Gupta, the future of fintech will be where AI-driven personalisation will be the most common way in which consumers and businesses will benefit from the system.