Tax planning tools for Indian taxpayers
Tax planning tools for Indian taxpayers
Today, in the year 2016-17, the government has provided various schemes in the budget for taxpayers. Tax planning can be done according to the benefits and the schemes that are beneficial to save tax. Tax planning can be a good way of investing money by using the schemes provided by the government in various ways so that people can benefit from the schemes and also pay tax eagerly.
Equity Linked Savings Scheme
Compared to traditional tax saving instruments like Public Provident Fund (PPF), National Savings Certificate (NSC) and bank fixed deposits; the lock in period of an ELSS fund is much lower. While ELSS investment is locked in to 3 years, PPF investment are locked in for 15 years, NSC investment is locked in for 6 years, and bank fixed deposits eligible for tax deduction are locked in for 5 years. As ELSS is an investment in equity markets and investing in this for a long term can give you better returns compared to other asset classes over the long term. You can also get income from your investment amount in the lock in period if you opt for dividend schemes.
Life insurance
Life insurance policy is today, both popular and widely adapted tool for tax saving and also for life insurance. Various plans are available in life insurance policy as per the requirement of the individual. The government as well as private companies are participants in life insurance business. For saving taxes, the section 80C of the income tax act provides benefits like the deduction for a maximum of Rs. 1,50,000 from the total income of the person.
Public provident fund
The public provident fund or the PPF is another popular income tax saving scheme in the country and provides an investment that provides assured returns along with tax benefits. It is governed by PPFS and PPFA. The scheme is available to those who have their own account or has minor children. The maturity period is 15 years and can be extended up to 5 years.
Residential housing property
This scheme provides tax benefits of different kinds which are important. The maximum deduction allowed here is Rs. 1,50,000. It is available to individual or HUF. A tax deduction is available for repayment of the principal amount that has been borrowed in section 80C. The payment of installment due to the company or other institutions, in which the assesses is member, towards the cost of property that is allotted to him, Registration fee or stamp duty for transfer of property to the assessee. Deduction for interest on housing loan is also possible under section 24B where an amount of Rs. 30,000 is allowable for maintenance of house or the repairs.
Sukanya Samridhi Account
In this scheme tax deduction is an application for up to two to three girls in case of twins in the first case or second case only. Here one can get a maximum deduction of Rs. 1,50,000. The min. initial deposit is 1000 with another one hundred rupees thereafter with the annual ceiling of Rs. 1,50,000 in a financial year. The interest rate is 9.20 % w.e.f. the maturity is 21 years from opening the account. The period of deposits is made up to 14 years from the date of account opening.
Children education
Tax planning and deduction can be done through education of the children. One can get tax exemption on tuition fee of the children to any university or school or college or other institution in India for the sole purpose of education.
Health insurance India
The Medi-claim policy or health insurance in India covers the expenditure towards the medical treatment and the hospitalization. There are terms and conditions for the policies from different companies. The tax deduction available is Rs. 15,000 and on senior citizen it is Rs.20, 000.
Considerations
People are aware that they can save tax by investing and proper tax planning in various schemes. Investment should be made any time of the financial year. On the basis of proof, one can submit the income tax by the specified date. Those from a business background or professionals are liable to pay the tax in advance during the financial year. The salaried individual’s tax is deducted at the source directly from the salary itself. There are different taxes like fixed deposit, house property or the capital gain. It is you who will have to pay tax on these additional income taxes after doing a perfect tax planning.