Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

TAX PLANNING FOR THE SALARIED!

You can enjoy a maximum take home pay by including these tax free allowances & perks in your annual pay package!

The Income-tax Act provides for a number of allowances and perquisites which have been notified as tax free and every salaried taxpayer must endeavour to negotiate his pay package in a manner that the same can include such tax free allowances and perquisites. This would ensure that he is able to take maximum take-home pay per month with the minimum deduction of tax. 

Some of the important tax free allowances and perquisites are listed here under: 

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INVESTMENT WONDERS OF PPF!

Public Provident Fund (PPF) is a hot favourite amongst tax saving investments with an effective return upto 18.22%!

PPF enjoys the pride position of being a wonderfully attractive investment scheme offering total safety, a high degree of flexibility, reasonable tax free return and useful tax saving through the shelter of income-tax rebate. Let us take a bird’s eye view of these special attractive features of PPF:

 Total Safety: Enjoying highest security in terms of investment, PPF is perhaps the only asset which is free from any civil claim or attachment, even by a Court of Law. No wonder, there are people who have practically lost everything in the debt claims against them, except their investment in PPF!

 High Flexibility: Although the maturity period of investment in PPF is 15 years from the opening of the Account, the minimum annual investment required is only Rs.500 per annum, giving the investor freedom to invest as per his choice and available resources.  The maximum limit of investment is Rs.1,00,000 per annum.  The other attractive feature of PPF is that even after 15 years, the account can be renewed for a fresh term every 5 years.  This facility of extending the 5 year block period from 15 to 20 to 25 to 30 years and so on can be availed continuously as per the choice of the investor.  The privilege of one annual withdrawal from PPF after the initial 6 years period and even during the extended block period after 15 years as available to the investor can come extremely handy in times of need.

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YEAR END TAX MANAGEMENT!

With 31st March around, just ensure that you are not missing out on securing any tax saving & filing of your tax return! 

As the fiscal year 2012-13 ends on 31st March, it’s time for all income-tax taxpayers to take a quick look whether they have fully availed of the opportunities for tax saving via saving of specified investments and allocations. 

 TAX SAVING THE 80C WAY!

            ‘Be happy and gay, saving tax the 80C way!’  This should be the ‘magic mantra’ of all taxpayers. “My liquidity constraints do not permit me to invest,” some may retort.  But let this not be your excuse.  Infact, you should be prepared to even beg or borrow or secure a loan or gift or even draw out of your exempt income or accumulation, to make up for your investment limit of Rs.1,00,000 and thus plan to lawfully avoid your tax sorrow.  This is so, because Section 80C of the Income-tax Act does not require you to invest out of your ‘income chargeable to tax’.  This point can be better appreciated by the illustration hereunder:

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TAX SAVING, THE HEALTHY WAY!

Take care of your family’s health insurance & check-up needs & avail useful tax saving deductions u/s. 80D!

Section 80D of the Income-tax Act provides that a taxpayer can claim a deduction up to Rs.15,000 per year in respect of health insurance premium paid by him or any contribution made to the Central Government Health Scheme (CGHS), by any mode other than cash, out of his income chargeable to tax. It needs to be noted that payment of premium, by any mode other than cash viz. cheque, draft or credit card, is one of the important conditions prescribed under Section 80D. 

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AXE YOUR TAX AND RELAX!

With diverse recipes available for tax saving u/s. 80 C savings & investments require some smart planning!

             The scheme of Section80Cof the Income-tax Act provides for deduction out of taxable income of a taxpayer who is an individual or HUF, in respect of specified savings, investments and allocations made by them during the financial year.

             Section80C offers deduction to either an individual or HUF. However, there are diverse recipes under Section80Cprescribed for the two entities. An HUF does not enjoy the entire range of choices under Section80Cas available to an individual. Moreover, some investment or spending avenues, such as contribution to statutory or recognized provident fund or housing loan repayment are exclusively available only to the concerned salary earner or house owner as the case may be.

           However, there are several other deductions, which offer fairly flexible opportunities for tax planning and it is in respect of some of these, that a head of the household must do some smart thinking. 

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MAJOR TAX SAVING FOR MINOR’S INCOME

Using the medium of a discretionary trust, you can plan to save a decent tax of Rs.2,06,000 on income of Rs.10,00,000!

              Section 64(1A) of the Income-tax Act provides that “in computing the total income of any individual, there shall be included all such income as arises or accrues to his minor child.” With a view to ensure building up income for minors without attracting the above provisions relating to clubbing of income, one of the effective tools is a Private Discretionary Trust.

WHAT IS A DISCRETIONARY TRUST?

              A private discretionary trust is a trust wherein the beneficiaries and/or their shares in the income and assets of the trust are not specified in the trust deed. The trustees of such a trust are given full discretion in deciding these matters. The provisions of Section 164 of the Income-tax Act which govern the taxability of a private discretionary trust specify that income-tax shall be charged on the income of the trust at the ‘maximum marginal rate’ (currently 30.9%). (more…)

BANK ON TERM DEPOSITS FOR AVAILING TAX SAVING

Investing in the ‘Tax Saving Deposit Scheme’ can be a great choice for NRIs & HUFs who cannot invest in PPF!

              The Finance Act, 2006 enlarged the scope of investments and allocations eligible for deduction under Section 80C of the Income-tax Act through the inclusion of ‘a term deposit for a period of 5 years or more in accordance with a scheme framed by the Central Government.’  Pursuant to this, the ‘Bank Term Deposit Scheme, 2006’ was announced vide Notification No.203/2006 dated 28th July, 2006. (more…)

TAX HOLIDAY FOR LEAVE TRAVEL CONCESSION

Get LTC from your Employer and Enjoy Family Vacation with Tax Exemption

One of the important tax free perquisites available to salaried employees is ‘Leave Travel Concession’ (LTC) or ‘Leave Travel Assistance’ (LTA) which is treated as exempt under Section 10(5) of the Income-tax Act read with Rule 2B of the Income-tax Rules.

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TAX INCENTIVES FOR HIGHER EDUCATION

Eight Years Deduction for Interest on Loan for Higher Education, without any Monetary Ceiling

Section 80E provides for deduction in respect of any amount paid by an individual (without any monetary ceiling) by way of interest on loan taken from any bank or notified financial institution or an approved charitable institution for the purpose of pursuing his higher education or the higher education of his relatives viz. his spouse or his child or even in respect of a student for whom the individual is the legal guardian.

This deduction is allowed for a maximum period of eight years starting from the year in which the taxpayer starts paying interest or until the interest payable on such loan stands paid in full, whichever is earlier.

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TAX SAVING MAGIC OF SECTION 80C!

Do Not Miss to Buy, Beg or even Borrow…
Be Smart to Invest & Avoid your Tax Sorrow!

Be happy and gay … saving tax the 80C way!’  This should be the ‘Magic Mantra’ of all taxpayers with taxable income above Rs.8,00,000, who attract the maximum tax bracket of 30.9%. If you think smart, you can save a good Rs.45,743 as income-tax, without even investing a penny from your pocket! (more…)

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