How to Work Out for Effective Tax Savings Plan?
Everyone
wants to save those extra bucks filling up the government treasures, by taking
a suitable tax savings plan. However, while planning for tax savings it is
certainly not prudent to wait till the end of the financial year. And when you
realize later it may not be possible to do any planning.
Everyone
have their own perception towards taxes. Although people may think its being over cautious or planning too early but when it
comes to tax savings investment it may never be early and it is a proven fact
that earlier the planning better will be the saving of time and money.
Various
avenues to explore which will minimize the tax burden effectively are available
in the market. Tax saving plans can be worked out by two ways by spending and
by investing. The Income tax act has many provisions to provide the benefit of
exemption or deduction of income based on the payments or expenditure you incur
as well as the saving or investment that you make.
Payments
or expenses like medical insurance premiums, cost of treatment for specified
diseases, donations to specified funds, charitable institutions are nature of
expenses which come under the tax savings brackets. However, there are other
investment modes too to avail the benefit of income tax deduction.
Some
of the investment options available under the popular Section 80C of Income Tax
Act are contribution to Public Provident Fund, post office savings schemes,
investment in mutual funds etc. Even the deduction towards repayment of
principal on housing loan could be considered under this category since it
comes out of the investment in a house property.
Another
tax
savings plan is to invest in tax saver fixed deposits with banks.
Investment in such fixed deposits for an amount not exceeding Rs. 1,00,000 in a
year (with a tenure of 5 years) are exempted from payment of income tax under
Section 80C of Income Tax Act.
However,
a few drawbacks in this scheme are that, no encashment is possible before the
completion of tenure. Also, unlike the Provident Fund (both EPF and PPF) and
ELSS, the interest on such deposits is taxable.
Under
new section 80CCG of Income Tax Act new retail investors in equity market are
allowed a deduction from income, in respect of sums invested under an equity
savings scheme. The 'Rajiv Gandhi Equity Savings Scheme' introduced in the
Finance Act 2012 with much expectation, evoked a mixed response as the benefits
towards tax saving was not seen as a significant one. Realizing this, the
Government had made some changes extending the benefit for subsequent years.
Most
of the young couples and middle aged income tax payee incur quite high payments
towards the education fees of their children. The expenditure incurred on
education fees is also eligible for a deduction under Income Tax Act, thus, if
you are incurring expenditure towards education fee of your children, please
check whether these are eligible for deduction under the IT Act.
While
your mission is creating one good tax savings plan the ways to reach your
mission are many. It is now you who need to decide the route that you wish to
take to reach your destination of tax savings.[Source:
https://tackk.com/r005qn] |
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