“TAX
PLANNING IS NOT TAX EVASION”
Tax Planning
involves selecting the right tax saving instruments and making investments
accordingly. Tax Planning leads to making investments or contributions in line
with prescribed guidelines of available tax exemptions, deductions, rebates and
allowances that lead to a reduction in tax liability.
Prudent Tax Planning is judiciously using provisions of the
Income Tax Act to optimize your tax liability.
Prudent Tax Planning is judiciously using provisions of the
Income Tax Act to optimize your tax liability.
Investors may note that
while planning for saving taxes, one can assume many forms (Sec 80C, 80D,
24(B)). But most
important and popular sections for tax saving are Sec 80C, 80D. As we all know,
Sec 80C allows for a Deduction of up to Rs. 1,00,000/- from the gross total
income whereas Sec 80D allows Rs. 15,000/- towards health insurance and Sec 24
(B) allows Rs. 150,000/- towards Interest on borrowed capital for house loan.
FYI,
1) Exemptions refer
to that income which are earned but not taxable. e.g. proceeds from an
Insurance company, Dividend income, LTA rules etc.
2) Deductions refer
to those investments or payments which will be deducted from total income. e.g.
Contribution to ELSS, ULIPs, children’s tuition fees paid, interest on home
loan etc.
3) Rebate is a
reduction from tax payable. Currently there is only one rebate available i.e.
Rebate for STT applicable only to an individual who is involved in the business
of dealing in shares.
Investment
Avenues Falling under Section 80C that aid in tax planning & saving
include:
o
Employee
Provident Fund (EPF , in company)
o
Public
Provident Fund (PPF)
o
Tax
Saving MFs (ELSS of Mutual Funds)
o
Life
Insurance Premium (ULIPS also)
o
Infrastructure
Bonds (issued by banks , government bodies)
o
NSC
(National Saving Certificate)
o
Repayment
of Principle amount towards Home Loan
o
Tax
Saving Fixed Deposits (at least for 5 years with a scheduled bank))
Tax Saving Avenues
including the above will be discussed in a separate blog in detail for your
prudent & effective tax planning effort to save loads of money.
Really great inputs added in this post on tax planning.
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Dear Accountants Brisbane, Thanks for your comments; I will be inputting more on Investment Planning in future...
DeleteThank$ Indianist for ur cool comment. Yes as said i would add more info on tax saving & planning methods in my future posts...
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