Born between 1981-1996, Millennials make up the bulk of the people who are working and earning. They are quite savvy when it comes to technology. But are they equally savvy to use this technology and become financially proactive? Let us find out.

Think about it…almost everyone you know who is between 27-42 has a loan, be it a home loan, a car loan or a personal loan. In fact, currently India's credit card usage is at a high. According to an article in the Forbes, India's credit card penetration is currently estimated at about 5.5% of the population of 1.4 billion, or 77 million people. While the penetration rate is low, it already includes a market larger than the entire population of Malaysia or Thailand! This Buy Now Pay Later is a trend that is here to stay and Millennials more easily sport this trend.

Another study found that three out of four Millennials (74%) are at least somewhat stressed about managing their finances and are most worried about saving money, managing debt, and planning for retirement. Their top three financial worries are knowing how much to save, finding enough money for savings, debt management, and retirement.

The fact is that most Indian families don't support conversations around 'personal finance' and though many Millennials learn new terminologies pertaining to personal finance on an experimental basis, they do not have appropriate guidance about managing their finances.

A survey[1] indicated that 57% of Millennials invest in fixed deposits and that 36% of Millennials invest in the Provident Fund and Public Provident Fund accounts.

Even so, Millennials are supposedly unaware of the tax deductions and tax saving avenues. For example, many young professionals aren't aware that the interest they pay on their education loans is eligible for income tax deduction under Section 80E of the Income Tax Act.

The question to address here is - why are Millennials choosing not to indulge in tax saving?

A good starting point to answer this is the increasingly changing nature of jobs and employment. This generation has had the fortune of witnessing the advent of the digital revolution which has created a massive change in jobs and opportunities.

Due to the rise of freelancing apps and an increasing job crisis, gig jobs are becoming increasingly desirable and available for a tech-savvy generation of Millennials. An increasing number of Millennials are moving from traditional or conventional job profiles into contractual jobs, freelancing, project-basis gigs etc. According to a report, in India, there are 15 million gig workers employed in sectors like software, shared services, and professional services.

Digital nomads have no idea of the usual tax-exempt components that come with a salary in a conventional structure. The perks of HRA, LTA, Uniform allowance, etc. are unknown to them. In fact, the straightforward ways of tax saving are unknown to them. Thus the less evident forms of tax saving are completely out of their radar.

India has also adopted a new tax regime which made changes to many of the claims and exceptions made in the old tax regime . For example, you can longer make any claims relating to house rent allowance (HRA) or leave travel allowance (LTA). Many other exceptions have also been ruled out, for example, deductions under section 80TTA , which dealt with the income you got from the interest on your savings account, are no longer applicable in the new regime.

Understanding which tax regime you should choose, which one suits your current situation best, adds another level of complexity for Millennials.

Let's see how Millennials can use taxes to build your savings:

1. Home loan :Whole annual income spent on repayment of the principal borrowed amount is eligible for Section 80C deductions of up to 1.5 lakh. Section 24(b) allows for tax deduction on the interest portion of a house loan maximum up to Rs 2 lakh per year.Furthermore, if Millennials rent out the newly purchased home, the interest component can be reduced from rentals so received. Interest on loan taken for the purpose of building a home can be claimed as deduction under section 24(b), as long as the construction process is completed within five years.
2. Health insurance policy:Millennials can claim tax deductions (depending on your age) under section 80D for the portion of your income spent on premium payments.
3. Government schemes:Millennials can claim up to Rs 1.5 lakh spent on government mandated schemes as deduction under Section 80C of the Income Tax Act.
4. Life insurance plans :Investing in life insurance plans provides a dual benefit of life insurance and savings. Section 80C of the Income Tax Act provides deductions for premium payments, and Section 10(10D) provides for exemption on policy payout as per the conditions prescribed therein.Acquisition or renewal of life insurance coverage, as well as annuity payments on such plans made through monthly salary, are also eligible for tax deductions of up to Rs 1.5 lakh under Section 80CCC . Certain pension funds are eligible for deductions of up to Rs 1.5 lakh under section 80CCD(1).
5. Investment options under Section 80C and beyond :The most popular tax-saving options available to individuals and HUFs in India are under Section 80C of the Income Tax Act, Section 80C includes various investments and expenses you can claim deductions on – up to the limit of Rs. 1.5 lakh in a financial year.Apart from the 80C deductions, there are various deductions under Section 80 Millennials can use to save on income tax. Tax benefits on health insurance premiums and home loan interest are a few-

• Medical insurance premium to be claimed at Rs. 50,000. (Rs 25,000 for self-spouse and children and Rs 25,000 for dependent parents below 60 years). Claim medical insurance premium paid up to a maximum of Rs 1,00,000 per annum if availed for senior citizens (assuming self and parents above 60 years).
• Any charity to notified institutions or funds can be claimed as a deduction under section 80G.
• Interest paid on education loan is allowed as deduction under section 80E Every generation has its own needs and desires, but savings are an important factor in building a stable life. Millennials should not be missing out on this opportunity to build wealth and stability into their lives.