They may have great jobs and could be drawing handsome salaries, but it seems, Gen Y is not very smart when it comes to money matters. Tax filing data show that 25-30-year olds pay significantly higher tax than older taxpayers. The average minimum tax paid by 25-year-old taxpayers earning 10-11 lakh a year was 12%. But 34-year-olds with the same income paid only 6%.
These figures are based on a study of the tax returns filed last year through tax filing portal Taxspanner.com. The study looked at the bottom 10% of roughly 1.2 lakh taxpayers across different ages and found that the minimum average was lower among older taxpayers. "Younger taxpayers are not very adept at planning their taxes. Many of them are not aware or able to claim the various tax deductions available to them," says Sudhir Kaushik, CFO and co-founder of Taxspanner.com.
Taxspanner.com noted that nearly 51% of the salaried taxpayers had not fully exhausted the 1 lakh saving limit under Section 80C. Only one out of four of these taxpayers had claimed deduction for medical insurance under Section 80D.
The study found that senior citizens were more clued in about tax rules and, therefore, managed to curtail their tax liability to a great extent. One of every five senior citizen assessees paid zero tax even though the average income was 4 lakh a year. Only 26% of senior citizen assessees had not claimed the full deduction under Section 80C.
Kaushik says the minimum payout ratio of 12% is very high and indicates that younger taxpayers are losing out on benefits available to them. "They are leaving far too much on the table for the taxman," he says.