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Want to tax maximum benefits available for saving
tax. Here, we discuss about some of the best planning tools for
effectively reducing you tax burden.
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Insurance as tax planning tools.- In today's
scenario most of the insurance product come with tax advantages. But
its important for you take an insurance as tax planning tool only if
you need insurance. It should not be taken only for the purpose of
saving tax in that you would end up paying more that tax you save.
Insurance benefit is available under Sec 80C for premiums paid
towards life insurance policies and Sec 80D for premiums paid on
your health insurance policies.
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Be a systematic investor- I would suggest that
you do tax planning early in the year and start investing small
amounts since the beginning of the year. Don't wait for January or
February for getting a notice form your office investment proofs as
investing in last three months would hurt your monthly budgets for
those months. Apart form that sooner you invest sooner you would get
the returns. For example if you invest RS 5000 in PPF and RS. 10000
in Mutual funds in April as compared to next year Jan and February.
In this case you would get the returns for those months and also get
the tax benefit in the end of the year. Therefore, you maximize you
returns.
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Beware of you pocket - The idea is that do not go
beyond your investment capacities for tax planning purposes as in
most of investment tools which give tax benefit you need to be
invested for some fixed period and also may be you take a plan where
you will make a commitment for several years. I suggest be carefully
and invest carefully so that you do not end up paying more that what
you save as tax in a year or two.
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Know post tax yields- Its important that you that
which investment would yield how much. Its very much possible that
the investment A with return of 8% gives higher yield
post tax than and Investment B with an return of 12%.
Here, investment B looks more attractive but in actual you would
make more money by making investment A.
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Take advantage of you marriage. lets assume that
husband falls in a tax slab of 20% and Wife in 30% or vice versa. In
this case i would suggest that the person whose income falls in
higher slab should invest first which would result in optimum tax
planning.
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Be aware of the Common misguided philosophy about tax
planning.
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If you a salaried
employee and your employer deducts tax at source and gives you the
form 16. It does not mean that you would not file your tax return.
On has to file its own tax return irrespective whether his/ her
employer has deducted tax at source or not.
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If you are thinking that
tax on the interest of your bank fixed deposits is to be paid on
maturity . Than its incorrect, Tax on interest is to be paid in the
current year even if you don't receive its because the tax liability
on interest income of fixed deposit is calculated on accrual basis.
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If you think that
investments made in child or wife's name is their income. Than its
an incorrect notion as you have transferred money form your account
therefore income generated form those investments would be clubbed
in your income. And the entire income is table.
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Got a cash gift for a
known person. If you think that cash gift from a kwon person is not
taxed than its incorrect. Cash gift from a known person is fully
taxable in the hands of recipient of cash gift. In case you get a
cash gift form a relative , in this case the cash gift in not
taxable in the hands of the recipient. But if the cash gift received
from a friend is less than Rs 50,000. in this case the cash gist is
not taxable.
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What to do with interest
earned on savings account. I would say all interest earned form any
source irrespective of bank savings account or bank fixed deposits.
All interest in taxable in the hands of recipients. The only catch
is that if the interest income at any bank branch is less than Rs
10,000.00 In that case the bank would not deduct Tax deducted at
Source (TDS). Even if you have interest in come from two branches of
State Bank of India lets say Cp branch and GK branch and at both the
places you interest income is Rs 9,000.00 each. The bank would not
deduct TDS on the interest earned.
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