Tax Planing

Tax planning is a vital part of your financial planning. Efficient tax planning enables you to reduce your tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions rebates and allowances while ensuring that your investments are in line with your long term goals. Tax planning is the duty of every responsible citizen of the country. Simply paying all the taxes as implicable on you is the one option and minimizing the Taxes through proper Tax planning is the other. Most people choose second option as it is a fundamental right of every citizen to avail all the tax incentives provided by the government.

Tax planning is a legal process and not tax avoidance. It is a proper planning of you income sources and investments. Putting your money in 80C investments doesn’t mean tax planning.

11th hour investments done for tax planning just for the sake of saving tax liability is not the correct way to do it. There are ample ways to help you reduce your tax burden with appropriate options that suits your needs and serve the purpose in right manner. You should plan for well in advance with the help of Tax Expert.

We guide you in the Planning & managing your finances and achieving your financial goals. Basic planning starts with Tax planning as good tax planning can increase the take home salary. These investments can also cater to a few of your needs if this is well planned. Tax planning is not restricted only to tax savings investments (Section 80C). There are several other components E.g HRA, Home Loans, LTA, Re-imbursements, etc to reduce the taxable income

Tax Deduction

Sec 54 EC has capital gain saving facility. Different Goverment companies like NHAI, REC, etc. have these type of bonds and these are opened from timr to time, not at regular basis.

Other Tax related sections that one should know:

SECTION 80C

According to Section 80 C, the investment ( up to a particular limit ) that you make in certain instruments like LIFE INSURANCE, MUTUAL FUNDS (ELSS) P.P.F. etc. or an expense like payment of tuition fees that you incur reduces your gross total income that amount that you can claim under this section is Rs. 1 Lac.

SECTION 80CCC

The premium that you pay towards pension plans qualifies for tax benefits under Section 80CCC.The maximum amount that you can invest under this section is Rs. 1 Lac. Note that the combined investment u/s 80 C and 80 CCC cannot exceed Rs. 1 Lac.

SECTION 80 D

The premium that you pay towards health insurance for yourself and family(spouse & dependent children) qualifies for tax benefit under Section is 15,000. Additionally you can claim Rs, 15,000 for premium paid for health insurance. In case of senior citizen the limit is enhanced to Rs. 20,000. Hence the maximum amount that you can claim is Rs. 35000.

SECTION 80CCF

Another avenue to save tax was introduced in the Budget 2010 in the form of section 80CCF. This section allows a deduction of Rs. 20,000 for investments made in Infrastructure Bonds. The deduction of Rs. 20,000 under section 80CCF is over and above the deduction of Rs. 1,00,000 available under section 80C, 80CCC and 80 CCD.

SECTION 24

Repayment of interest is home loan up to Rs. 1.5 lacs is tax deductible if the property is self occupied. If the property is rented out, there is no cap on the interest option that you can claim for deduction i.e. the entire interest portion be reduced from the taxable income.

SECTION 80 E

The interest on loans taken for higher education qualifies for tax benefits. The loan taken for spouse or children education also qualifies for the same. Do remember that there is no ceiling to the interest option for the loan but unlike home –loan,principal repayment gets no tax advantage.

SECTION 80DD

A fixed total of RS.50,000 qualifiers education irrespective of amount incurred towards expenditure/investment for the medical treatment of handicapped dependent certified by medical authority. In case the disability is severe deduction is Rs. 1,00,000.

SECTION 80 DB

Deduction up to Rs. 40,000 (for Senior citizen Rs.60,000) is allowed for medical treatment of specified diseases certified by Government hospital

SECTION 80G

A part ( 50 % ) or entire donation made to specific Trusts / charities/ funds is eligible for deduction under this section. The maximum amount that can be claimed under this section is 10 % of (gross total income )claim under various sections.

SECTION 80 CCD

The deduction for contributions to a pension scheme of the Central Government is available only to those individual who have been employed by the Central Government on or after 1st January 2004,and will be allowed for any amount deposited in such a pension scheme. But in this case, deduction of more than 10 percent of the employee’s salary shall not be allowed.

SECTION 80 U

It is deduction in the case of a person with a disability, An individual who is suffering form a permanent disability for mental retardation as specified in the persons with disabilities (Equal Opportunities, Protection of Rights and full Participation) Act,1995 or the National trust for Welfare of Persons with Autism, Cerebral palsy, Mental Retardation and Multiple Disabilities Act,1999,shall be allowed ad deduction of Rs. 50,000. In case of severe disability it 75,000

Tax Saving Schemes

According to income tax section 80C here are some tax saving schemes available.

Mutual Funds (ELSS)

Now these days this scheme is very popular. In this equity linked saving scheme one can save tax upto Rs. 1 lakh by investing in any mutual fund tax saving scheme. These schemes are for three years locking period only. Total redemption/maturity amount in this scheme is complete tax free and it gives 100% tax rebate of invested amount up to Rs. 1 lakh.

ULIPS 

Unit Linked Insurance Plans are very popular now these days and they gives 100% tax rebate upto Rs. 1 lakh. All returns at the time of maturity are tax free except annuities/monthly pension amount.

SECTION 80 D 

In this section one can save tax 100% by giving Rs. 15000/- maximum as health/mediclaim insurance  premium and Rs. 20000/- as senior citizen

National Saving Certificate (NSC)

National Savings Certificate, popularly known as NSC, is a time-tested tax saving instrument that combines adequate returns with high safety. National Savings Certificates are available in the denominations of Rs. 100, Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. There is no maximum limit on the purchase of the certificates. Period of maturity of a certificate is six years. Presently, maturity value of a certificate of Rs. 100 denomination is Rs. 160.10. Maturity value of a certificate of any other denomination is at proportionate rate. Premature encashment of the certificate is not permissible except at a discount in the case of death of the holder(s), forfeiture by a pledgee and when ordered by a court of law. Interest accrued on the certificates every year is liable to income tax but deemed to have been reinvested. Income Tax rebate is available on the amount invested and interest accruing under Section 80C of Income Tax Act, as amended from time to time. Income tax relief is also available on the interest earned as per limits fixed vide section 80L of Income Tax, as amended from time to time.

Bank Fixed Deposit

This tax saving scheme is for a very long time period (5) years and taxable and interest is also very low and it doesn’t beat inflation rate also.

PPF A/C

This facility is available with banks and post offices. This scheme is for 15 years and very long term scheme.