Thursday, August 13, 2020
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Best Tax Saving Instruments

Why just save tax? Get Growth and tax free returns
Why just save tax? Get Growth and tax free returns

How to choose best tax saving instruments

How much tax did you pay last year?

You don’t need to tell me the exact figure.

Just think about the percentage of your total income that you paid out as tax!

This blog post will likely give you ideas about how to pay less than that percentage this year..

so read on..

When Gauri came to meet me, she was worried ! “How do I decipher and understand  the Indian Income Tax Act? How can I save taxes under the various deductions which I can claim to save tax at the time of filing the Indian Income Tax Act returns?. I would like to understand the various deduction which can help me in saving tax, provided I have done proper tax planning and am aligned into my goal”- Said Gauri. I asked her to calm down and have a glass of water first! Once she was settled down and was eager to know more about saving taxes, the easy way, she asked ” Can you explain me about saving taxes in the easy way without much jargons and without technical words? I don’t need to get into deeper details but today, I wish learn about the top ways to save tax as a salaried employee and Taresh I trust you to explain to me, best suited tax saving tools which can get linked to my financial goals also” Taresh replied ” I am going to make it easy and simple. Relevant, crisp, short and to the point… all tax saving investments linked to your Goals, Gauri”

Taresh explained ” As an individual, you have to do proper tax planning so that the deductions can be  availed from the gross total income, to arrive at the net tax levied on the balance of the income as per the income tax slabs available.”

Gauri replied “I have started to understand the most popular ways of tax planning which can help me to legally save my taxes,  in this financial year 2015-16 as you have explained the top eight ways to save tax: this is a very brief and a summary of the tax planning ideas and I understand that I have to refer to the income tax bill and the act for detailed understanding.”

Tax
hardest Thing to understand is Taxes?

The Summary of the discussions are as follows:

  1.  deductions under the section 80 C, 80 CCC,  and section 80 CCD– reductions available under these three sections combined allow a person to save up to Rs.1,50,000/- per financial year individually or in combination.  With many instruments available, which have been specified by the government, one can save under any of the following to save tax  Tax Comparison by Taresh
    •   PPF
    •  five-year tax saving fixed deposit
    •  pension plans
    •  EPF contributions
    •  life insurance policy premiums
    •  NSC
    •   equally linked mutual refunds (read more)                ELSS by Taresh
    •  in addition, an amount of Rs.50,000 has been introduced as an investment option in the NP ( National Pension Scheme)  for the financial year 2015-16

      Taxes by Taresh
      Taxes
  2.  Section 80 D, section 80 DD,  section 80 DDB: if you have paid premiums for insuring your own health, spouse, children , parents then you can avail the benefit; to understand more let’s take a deeper look:
    •  section 80 D: With effect from Financial year: 2015-16 (w.e.f. 1/4/2015) allows Rs.25,000 for self or spouse or children and Rs.30,000 if you are paying for your parents, provided the premium payment has been made in the financial year as per the budget 15 ( total deduction of Rs.30,0000)
    •  if you are less than age 60 but your parents are above the age of 60, then the deduction available for the  premium for your parents, can give you further deduction of Rs. 5000,  that is,  a total of Rs.55,000/-.
    •  if you and your parents are above the age of 60, then a deduction of Rs.60,000 is available.
    • 80D deductions limits by Taresh

      80D benefits summary by Taresh
      80D benefits summary by Taresh
    •  an additional new deduction has been allowed for preventive health checkup for Rs.5000/-.  note that this is not an addition to the  Rs.15,000 / Rs.20,000 stated above

      Time for Taxes
      Time for Taxes
    • The Above limits are applicable for Financial Year 2015-2016 (or) Assessment Year (2016-2017).

    •  under section 80 DD– for the treatment of handicapped dependents
    •  under section  80 DDB allows deduction for treatment of specified diseases
  3.  section 24 for tax planning under home loan if you have a home loan, then the principal amount of the home loan is already a deduction available  under 80 C. In addition, you are allowed to claim deduction of interest paid for the home loan under section 24 for a maximum amount of  Rs. 2,00,000/-.

    Funny things about Taxes?
    Funny things about Taxes?
  4.  Saving tax on the education loan for a student  (self or spouse or dependent children) with no maximum limit under section 80 E
  5.  section 80 CCG (RGESS): allows a taxpayer to save tax up to Rs.50,000 provided the taxpayer has an annual income of less than Rs. 12 lakhs and is investing in shares or specified companies or specified mutual funds as a first-time investor only;  for 50% of the invested amount only;
  6.  for income tax deductions under 80 G– 50% /100% of the donation amount  is available as a deduction under terms and conditions
  7. In Addition, there are some of the tax saving allowances for salaried tax payers, who can avail of them provided their company is agreeing to such allowances as  per your grade.
    • Conveyance
    • Driver
    • Newspaper, Books and Magazine
    • Medical Treatment
    • Uniform
    • Telephone and Mobile
    • Personality Development
    • Office Entertainment

    Note: The professional tax paid by you every month is also eligible for tax deduction.

  8. Teaching Tax to children
    Teaching Tax to children

    Save Tax on rent paid under HRA

  9. Depending on your salary structure, you can further avail of the Leave Travel Allowances and Medical Expense

TAX SCHEMES

These were the top deductions available for Gauri to understand the income tax payable for her. Now, Gauri was assured of minimising her taxes legally and also making investments most suitable for her goals.

All is Fair in Taxes?
All is Fair in Taxes?

A SUMMARY: ELSS WAY tax goals BY TARESH

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Till Then, Happy Investing – Taresh –Easy to meet me

no good thing as Taxes
no good thing as Taxes

Why just save tax? Get Growth and tax free returns
Why just save tax? Get Growth and tax-free returns

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Tareshhttp://www.advantagefp.in
About ADVANTAGE FINANCIAL PLANNERS LLP: The Firm is registered with Government Of India-The Ministry of Company Affairs as a partnership firm. The firm is registered with SEBI (The Securities and Exchange Board of India) as "Registered Investment Advisors (RIA) under the SEBI (Investment Advisers) Regulations, 2013. Registration with SEBI as "Registered Investment Advisors (RIA) brings more formal approach, risk profiling, disclosure, and transparency. While the firm is a fee-based investment advisor, this brings you the opportunity to get unbiased, researched, accurate, transparent and professional advice. The firm is managed by the founder and its Partner, Taresh Bhatia. The company provides financial planning advisory services from its office in Gurgaon, India. The firm specializes in investment planning, retirement planning, tax planning, personal financial planning and wealth management. About Taresh: Taresh Bhatia is CFPCM CERTIFIED FINANCIAL PLANNERCM. He provides fee-only financial planning advice. He has helped over 300 families plan and organizes their economic life so as to move positively towards their financial goals. Taresh is an expert on financial advice and has three decades of industry experience. Among his qualifications, he is a CFPCM CERTIFIED FINANCIAL PLANNERCM and an MBA from IMI, New Delhi. He is also a member of the Financial Planners' Guild, India (FPGI), an association of Practicing Certified Financial Planners. If you have any questions, please email us at [email protected]

47 COMMENTS

  1. This is very comprehensive coverage of all tax saving possibilities. It may help if guidance is given depending on the income of the individual. For example, for a couple in retirement with a total income of say, Rs.12 lakhs, it will be good to figure out how much income will be shown in the name of the husband and wife and then work out strategies going from bottom up, rather than top down. In the top down model, the marginal rate of taxation is taken to be 30%.

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