Income Tax Planning

Most of us lack behind in the Tax planning. We always do it at the endof Feb or Mar, because of which we end up into wrong decisions. Here wewill help you to identify Tax saving investments as per yourrequirement. In India we can save Tax under sec 80cc up to Rs.1, 00,000 and apartfrom that we can also claim income tax exemption for interest on housingloan up to Rs.1, 50, 000, Mediclaim up to Rs.20, 000 for dependentsenior citizen parents. In India we have many instruments to invest fortax saving so therefore we should not invest in which comes first to us.

One should always do a proper and careful Tax planning. One should alsolook Tax planning as protection planning (Life insurance, mediclaim) oras wealth creation (ELSS, FD). First of all you need to find out howmuch Provident Fund is deducted from your salary. Because that amountwill be considered under your One Lakh rupees limit. For ex.: if Rs.25,000 yearly has been deducted from your salary then you have to thinkabout only remaining Rs.75, 000.

ELSS Fund or Tax saving Fund = this means the Equity Linked savingscheme. This helps you to indirectly invest in the equity market. But ithas three year lock in period. So you should invest amount which youwill need after three years only. ELSS provides you the benefit of Taxsaving as well as Wealth creation. Some Tax funds also provide you themedical benefits. Ask your agent about all the features of your Taxsaving fund. If you feel your agent is only interested in sellingproducts then you can always contact us for your queries.

Life Insurance Plan = It is always said that one should not look at theLife insurance plan as tax saving. We also suggest you the same thing.All life insurance plans gives you the tax benefit so you should alwaysgo for plan which is suitable to your life and your financial planning.You need not buy every year new policy. If you think that you havealready invested enough in life insurance plan but want to invest againthen you should go for ULIP plans. Payout from life insurance policy istax free.

Fixed Deposit = Mostly people who don't want to take risk invest inFixed deposit. Currently there is 5 year fixed deposit which providesyou the tax benefit. Currently the maturity amount is tax free. Thisinstrument provides you the benefit of tax saving and guaranteed return.FD is not preferable by financial planner due to less return compare toELSS and long maturity term. But if still one wants to invest in FD thenhe should invest spare amount which will not require in near future.

Loans = Currently in India there are two loans Home loans and Educationloan have Tax exemption. Many people invest in house so that they canclaim exemption. One should understand that under section 80cc onlyprinciple repayment can be exempt. Tax deduction on the interestcomponent comes under section 24 and will depend upon whether home isrented or self occupied. You should keep in mind that over a period of time the principle paymentincrease and the interest payment decrease. We should also analyzewhether interest payment is not more than the benefit of tax exemption.Under education loans, the interest that you pay will be tax deductable.

PPF and NSC= People who don't want to take risk they can invest theirsmall savings in PPF. It gives you guaranteed return but it has lock inperiod of 15 years. You can withdraw some part after 6 years. One canlook at this option as their Pension planning. PPF normally gives youthe 7.5% to 8% (subject to change) return but don't forget that it givesyou the benefit of compounding rate. If you have withdrawn yourProvident fund while changing a job then you can invest that amount inPPF. It will be saved as Provident fund and you will get the benefit oftax also.NSC stands for National Saving certificate. This one also assures youthe guaranteed return. You can also invest into post office.Most of us are not aware of the Volunteer Providend fund. Normally 12.5%of your basic salary is invested into your PF and same contribution isdone by the employer. As a concept of VPF you can invest up to 100% ofyour basic salary in your PF but your employee contribution will remainthe same. You just need to inform your employer to invest as a VPF fromyour salary. You will get the exemption up to 100% of your basic salaryif invested in PF or VPF. This is suitable for those who are risk averseand who don't want to get into the planning.

Mediclaim = Mediclaim policies taken for yourself or your parents willallow you to get a tax exemption under section 80 D up to a Rs.20,000limit for your parents and Rs.15,000 for yourself.