All men make mistakes, but only wise men learn from their mistakes. - Sir Winston Churchill. A man must be big enough to admit his mistakes, smart enough to profit from them, and strong enough to correct them.
Section I : Introduction Tax Saving Vs. Tax Planning Section II : Mistakes which we do while Saving Tax Section III : Your small steps (to Tax Planning ) can take you leaps Steps to Tax Planning Parameters for Prudent Tax Planning Section IV : Tax Planning with Section 80C Section V : Think Beyond 80C Section VI : Your Home loan & Tax Planning Section VII : House Property & Taxes Section VIII : Save Taxes on your hard earned Salary Section IX : Conclusion
Mistakes which we do while saving tax
? Doing Tax Planning at the last minute. ? Buying ULIPS. ? Ignoring Power of Compounding. ? Stuck on few options only.
Your small steps can take you forward by leaps
There is an old Chinese proverb which says, It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward. which in our opinion applies even to your tax planning exercise.
Steps to Tax Planning
Step 1 : compute the Gross total Income
Income from salary Income from house property Profits and gains from business & profession Capital gains (short term and long term) and Income from other sources.
Step 2 : Compute the Net Taxable Income
Investing in tax saving instruments (your most loved and sought after Section 80C, along with the recently introduced Section 80CCF) Donations Expenditure on handicapped dependent Premium payment for your medical insurance Interest paid on loan taken for higher education Rent paid for residential accommodation Expenditure incurred on a specified diseases suffered by you
Step 3 : Calculate the Tax Payable
The income tax rates for Individuals and HUFs for FY 2010-11 are as follows:
Net Taxable Income
Upto 160000 Upto 190000 (Women) Upto 210000 (Senior Citizens) 160001 to 500000 500001 to 800000 800000 & Above
Rate
NILL
10% 20% 30%
Education Cess @ 3% computed on your tax liability
Therefore if your net taxable income is Rs. 100000 then your tax liability will be computed as folllows,
Computation of Tax Liability
Taxable Income Upto 160000 160001 to 500000 500001 to 800000 800000 & Above Tax Payable Education Cess Total Tax 3% Nill 10% 20% 30% 1000000 34000 60000 60000 154000 4620 158620
Parameters for Prudent Tax Planning
A Prudent exercise of tax planning also extends to appropriate investment planning, which also takes into account your ideal asset allocation by considering the under-mentioned factors.
AGE
The younger you are more risk you can take and vice-a-versa
An early bird gets a bigger pie .
Particulars
Present Age (Yrs) Retirement Age (Yrs)
Suresh
25 60
Mahesh
30 60 30 7000 10% 1,58,23,415
Sandesh
35 60 25 7000 10% 92,87,834
Investment Tennure 35 Monthly Investment 7000
Returns Per Annum 10% Sum Accumulated 2,65,76,466
Income
If your income is high, your willingness to take risk is high
1. Park More money towards Market Linked SS 2. Home Loan eligibility. 3. Donating Some of your money for noble cause (Sec 80G).
Financial Goals Risk Appetite
SECTION 80C
Section 80C of the Income Tax Act enables you to effectively invest in tax saving instruments, in order to optimally reduce your tax liability
? ? ? ? ? ? ? ? ? ?
Life Insurance Premium Public Provident Fund (PPF) Employees Provident Fund (EPF) National Saving Certificate (NSC) , including accrued interest 5-Year fixed deposits with banks and Post Office Senior Citizens Savings Scheme (SCSS) National Pension Scheme (NPS) Unit-Linked Insurance Plans (ULIPs) Equity Linked Savings Schemes (ELSS) Tuition fees paid for children s education (maximum 2 children) if you invest in any or all of the aforementioned instruments, you would qualify for deduction under this section subject to the maximum of ` 1,00,000 p.a
One can also can use these tax saving instruments for prudent tax planning by recognising your age, income, financial goals and risk appetite. Now you may ask how ? Well, it s simple! In the aforementioned list you can classify the tax saving instruments into those offering variable returns (i.e. market-linked instruments) and those offering fixed returns (i.e. assured return instruments). By doing so you would be able to ascertain which suits you
Tax Planning with market-linked instrument:
Under this category you are investing in the capital markets, giving you variable returns. Following tax saving instruments are available for investment. 1. Equity Linked saving Schemes a. 100% diversified equity funds providing tax benefits.
b. Subject to a compulsory lock-in period of three years.
Deduction
The maximum tax benefit which you can enjoy is Rs. 1,00,000 p.a. under section 80C. Moreover, if you make any long term gains at the time of exit any time after the end of the lock-in period; then you would not have to pay any Long Term Capital Gains Tax (LTCG) too.
2. Unit Linked Insurance Plans (ULIPS)
a. invest in equity and / or debt instruments .
b. classified as aggressive (which invests in equity),
moderate or balanced (which invests in debt as well as equity) and conservative (which is invests purely in debt instruments).
Deduction:
The premium which you paying for your ULIP plans would be eligible for tax benefit, subject to the maximum eligible amount of ` 1,00,000 p.a. as available under Section 80C. Moreover, a positive point is that at maturity the amount which you or your beneficiary would receive is tax free (exempt) as per the provisions of Section 10(10D) of the Income Tax Act.
TAX Planning the assured way return
? Factors are not permiting you to invest in Market linked Instruments?????? Aagaya !!!!!!!! ? Tax Savings instruments which offer you assured returns
1. Non-Unit linked Insurance Plans
? Pure Term Life Insurance Plans ? Investment Cum Insurance Life Insurance Plans.
while you are considering your insurance needs, you should ideally look at only pure term life insurance plans, thus keeping your insurance needs separate from investment needs.
Deduction:
Over here too the premium which you paying for your such non-ULIP life insurance plans would be eligible for tax benefit, subject to the maximum eligible amount of ` 1,00,000 p.a. as available under Section 80C. Moreover, a positive point is that at maturity the amount which you or your beneficiary would receive is tax free (exempt) as per the provisions of Section 10(10D) of the Income Tax Act
2. Public Provident fund
joint application is not permissible . The account so opened will have an expiry term of 15 years . minimum of ` 500 to a maximum of ` 70,000 in a financial year in order to enjoy the tax benefit under Section 80C, and the amount to the credit of your account will be entitled to a taxfree interest at 8% p.a.
3. National Savings Certificate. 4. Bank Deposits & Post Office time deposits. 5. Senior Citizen savings Scheme.
THINKING BEYOND 80C
Well, most people think that tax planning ends with Section 80C; but please note that there s more to tax planning than just investment instruments specified under Section 80C. Our Income Tax Act, 1961 also considers the humane side of our life and also gives deduction for contributions made for financing our country s infrastructure development. So, in case if you pay your medical insurance premium, incur expenditure on the medical treatment of a dependant handicapped, donate to specified funds for specified causes, contribute in monetary form to political parties or electoral trusts, take a loan for pursuing higher education or if you are an individual suffering from specified diseases, then all this too can help you effectively plan your tax obligations, thus optimally reducing your tax liability.
Premium Paid for Medical Insurance (Sec 80D)
? Max Amount Rs.15000 ? Max amount Rs. 20000 (Senior citizen) Further, if you pay medical insurance premium for your parents (irrespective of whether they are dependant or not on you), you can claim an additional deduction of upto ` 15,000 under this section. So, for example, if you pay a premium of ` 15,000 for yourself and ` 15,000 for your parents, you will be eligible for a total deduction of ` 30,000. However, while paying the premium you need to ensure that the payment is made in any mode other than cash.
doc_813676901.pptx
Section I : Introduction Tax Saving Vs. Tax Planning Section II : Mistakes which we do while Saving Tax Section III : Your small steps (to Tax Planning ) can take you leaps Steps to Tax Planning Parameters for Prudent Tax Planning Section IV : Tax Planning with Section 80C Section V : Think Beyond 80C Section VI : Your Home loan & Tax Planning Section VII : House Property & Taxes Section VIII : Save Taxes on your hard earned Salary Section IX : Conclusion
Mistakes which we do while saving tax
? Doing Tax Planning at the last minute. ? Buying ULIPS. ? Ignoring Power of Compounding. ? Stuck on few options only.
Your small steps can take you forward by leaps
There is an old Chinese proverb which says, It is better to take many small steps in the right direction than to make a great leap forward only to stumble backward. which in our opinion applies even to your tax planning exercise.
Steps to Tax Planning
Step 1 : compute the Gross total Income
Income from salary Income from house property Profits and gains from business & profession Capital gains (short term and long term) and Income from other sources.
Step 2 : Compute the Net Taxable Income
Investing in tax saving instruments (your most loved and sought after Section 80C, along with the recently introduced Section 80CCF) Donations Expenditure on handicapped dependent Premium payment for your medical insurance Interest paid on loan taken for higher education Rent paid for residential accommodation Expenditure incurred on a specified diseases suffered by you
Step 3 : Calculate the Tax Payable
The income tax rates for Individuals and HUFs for FY 2010-11 are as follows:
Net Taxable Income
Upto 160000 Upto 190000 (Women) Upto 210000 (Senior Citizens) 160001 to 500000 500001 to 800000 800000 & Above
Rate
NILL
10% 20% 30%
Education Cess @ 3% computed on your tax liability
Therefore if your net taxable income is Rs. 100000 then your tax liability will be computed as folllows,
Computation of Tax Liability
Taxable Income Upto 160000 160001 to 500000 500001 to 800000 800000 & Above Tax Payable Education Cess Total Tax 3% Nill 10% 20% 30% 1000000 34000 60000 60000 154000 4620 158620
Parameters for Prudent Tax Planning
A Prudent exercise of tax planning also extends to appropriate investment planning, which also takes into account your ideal asset allocation by considering the under-mentioned factors.
AGE
The younger you are more risk you can take and vice-a-versa
An early bird gets a bigger pie .
Particulars
Present Age (Yrs) Retirement Age (Yrs)
Suresh
25 60
Mahesh
30 60 30 7000 10% 1,58,23,415
Sandesh
35 60 25 7000 10% 92,87,834
Investment Tennure 35 Monthly Investment 7000
Returns Per Annum 10% Sum Accumulated 2,65,76,466
Income
If your income is high, your willingness to take risk is high
1. Park More money towards Market Linked SS 2. Home Loan eligibility. 3. Donating Some of your money for noble cause (Sec 80G).
Financial Goals Risk Appetite
SECTION 80C
Section 80C of the Income Tax Act enables you to effectively invest in tax saving instruments, in order to optimally reduce your tax liability
? ? ? ? ? ? ? ? ? ?
Life Insurance Premium Public Provident Fund (PPF) Employees Provident Fund (EPF) National Saving Certificate (NSC) , including accrued interest 5-Year fixed deposits with banks and Post Office Senior Citizens Savings Scheme (SCSS) National Pension Scheme (NPS) Unit-Linked Insurance Plans (ULIPs) Equity Linked Savings Schemes (ELSS) Tuition fees paid for children s education (maximum 2 children) if you invest in any or all of the aforementioned instruments, you would qualify for deduction under this section subject to the maximum of ` 1,00,000 p.a
One can also can use these tax saving instruments for prudent tax planning by recognising your age, income, financial goals and risk appetite. Now you may ask how ? Well, it s simple! In the aforementioned list you can classify the tax saving instruments into those offering variable returns (i.e. market-linked instruments) and those offering fixed returns (i.e. assured return instruments). By doing so you would be able to ascertain which suits you
Tax Planning with market-linked instrument:
Under this category you are investing in the capital markets, giving you variable returns. Following tax saving instruments are available for investment. 1. Equity Linked saving Schemes a. 100% diversified equity funds providing tax benefits.
b. Subject to a compulsory lock-in period of three years.
Deduction
The maximum tax benefit which you can enjoy is Rs. 1,00,000 p.a. under section 80C. Moreover, if you make any long term gains at the time of exit any time after the end of the lock-in period; then you would not have to pay any Long Term Capital Gains Tax (LTCG) too.
2. Unit Linked Insurance Plans (ULIPS)
a. invest in equity and / or debt instruments .
b. classified as aggressive (which invests in equity),
moderate or balanced (which invests in debt as well as equity) and conservative (which is invests purely in debt instruments).
Deduction:
The premium which you paying for your ULIP plans would be eligible for tax benefit, subject to the maximum eligible amount of ` 1,00,000 p.a. as available under Section 80C. Moreover, a positive point is that at maturity the amount which you or your beneficiary would receive is tax free (exempt) as per the provisions of Section 10(10D) of the Income Tax Act.
TAX Planning the assured way return
? Factors are not permiting you to invest in Market linked Instruments?????? Aagaya !!!!!!!! ? Tax Savings instruments which offer you assured returns
1. Non-Unit linked Insurance Plans
? Pure Term Life Insurance Plans ? Investment Cum Insurance Life Insurance Plans.
while you are considering your insurance needs, you should ideally look at only pure term life insurance plans, thus keeping your insurance needs separate from investment needs.
Deduction:
Over here too the premium which you paying for your such non-ULIP life insurance plans would be eligible for tax benefit, subject to the maximum eligible amount of ` 1,00,000 p.a. as available under Section 80C. Moreover, a positive point is that at maturity the amount which you or your beneficiary would receive is tax free (exempt) as per the provisions of Section 10(10D) of the Income Tax Act
2. Public Provident fund
joint application is not permissible . The account so opened will have an expiry term of 15 years . minimum of ` 500 to a maximum of ` 70,000 in a financial year in order to enjoy the tax benefit under Section 80C, and the amount to the credit of your account will be entitled to a taxfree interest at 8% p.a.
3. National Savings Certificate. 4. Bank Deposits & Post Office time deposits. 5. Senior Citizen savings Scheme.
THINKING BEYOND 80C
Well, most people think that tax planning ends with Section 80C; but please note that there s more to tax planning than just investment instruments specified under Section 80C. Our Income Tax Act, 1961 also considers the humane side of our life and also gives deduction for contributions made for financing our country s infrastructure development. So, in case if you pay your medical insurance premium, incur expenditure on the medical treatment of a dependant handicapped, donate to specified funds for specified causes, contribute in monetary form to political parties or electoral trusts, take a loan for pursuing higher education or if you are an individual suffering from specified diseases, then all this too can help you effectively plan your tax obligations, thus optimally reducing your tax liability.
Premium Paid for Medical Insurance (Sec 80D)
? Max Amount Rs.15000 ? Max amount Rs. 20000 (Senior citizen) Further, if you pay medical insurance premium for your parents (irrespective of whether they are dependant or not on you), you can claim an additional deduction of upto ` 15,000 under this section. So, for example, if you pay a premium of ` 15,000 for yourself and ` 15,000 for your parents, you will be eligible for a total deduction of ` 30,000. However, while paying the premium you need to ensure that the payment is made in any mode other than cash.
doc_813676901.pptx