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Chrm Message From: m.goswami Total Posts: 1 Join Date: 15/06/2009
Rank: Beginner Post Date: 15/06/2009 06:52:21 Points: 5 Location: India

How to save tax  , as i joined new organisation and already paid the amt to my ex employer and new employer is paying me the same as taxable income.

What to do?

Chrm Message From: maheshwari Total Posts: 24 Join Date: 15/06/2009  
Rank: Executive Post Date: 15/06/2009 07:39:01 Points: 120 Location: India

Hi,

PPF, NSC, Post office accounts, insurance (except ULIPs) and FDs are safer, they offer lower returns and are not very liquid, due to their long lock-in period. On the other hand, ELSS has a short lock-in period but is more risky, while ULIPs carry the risk of ELSS but without the liquidity benefit. So while investing for tax saving purpose, take into account factors like your risk appetite, returns generated by the instrument, liquidity, capital appreciation and safety of capital.

You have two options to save tax. First is salary restructuring and second is tax saving instruments.

While these tax saving instruments do help you save tax, they have a maximum limit of Rs. 1,00,000. Any income above this limit attracts tax.

1] Insurance: All payments made towards both life and health insurance are eligible for tax benefits. Even contributions made towards pension payments can be eligible for tax benefits. Health insurance can let you save Rs. 15,000 over and above the ceiling of Rs. 1 lakh.

2] PPF: It is one of the safest tax saving investments available. Both interest and capital withdrawal from the fund are tax free. However its drawback is the lock-in period of 15 years.

3] NSC, Post office (CTD) accounts: These are government savings schemes available at post office, with a lock-in period of 5 years.

4] Bank deposits: These are special tax saving FDs offered by banks with a lock-in period of 5 years.

5] ELSS: These are tax savings instruments offered by mutual funds, with a lock-in period of 3 years. They invest in various quality stocks.

All these instruments carry different degrees of risks. While PPF, NSC, Post office accounts, insurance (except ULIPs) and FDs are safer, they offer lower returns and are not very liquid, due to their long lock-in period. On the other hand, ELSS has a short lock-in period but is more risky, while ULIPs carry the risk of ELSS but without the liquidity benefit. So while investing for tax saving purpose, take into account factors like your risk appetite, returns generated by the instrument, liquidity, capital appreciation and safety of capital. Remember, younger you are, riskier options are better for you, since over a long time, these instruments can generate higher returns for you, and minimize the risk of capital erosion. Also diversify your investment portfolio.

If these options are not enough for you, then here are some more:

Housing loan and education loan
Donation to charities/religious trusts

To summarize, first thing to do is to structure your salary so as to minimize your tax liability. This will minimize the need to invest for tax saving. This is because as with any investment, you must have the necessary capital to invest. Also the instruments that tend to be safer, have a longer lock-in period with low returns. This means you must keep on investing with fresh capital every year and in turn get meager returns. Those investments with higher returns mean you may not be able to withdraw your money even after the lock-in period, if the value of your investment is lesser than the capital invested. Take all these points into consideration before opting for tax saving plans.

Hope this helps..

Maheshwari

Chrm Message From: shaili Total Posts: 28 Join Date: 15/06/2009  
Rank: Executive Post Date: 15/06/2009 07:43:17 Points: 140 Location: India

Dear goswami,

You can save tax by availing of various deductions available under the Income Tax Act.

- Section 80C: As stated above, investments up to an amount of Rs 1 lakh annually are deductible from your taxable income under this section. This translated into a tax saving of Rs 30,000 in case you are in the highest tax bracket. This provides the individual with the double benefit of tax savings as well as investments.

- Housing loan interest: In case you take a home loan to buy your dream house you can claim benefit on the interest you pay on it, up to an amount of Rs 1.5 lakh annually. This can result in a tax saving of up to Rs 45,000.

- Educational loan: The interest that you pay for the repayment of any educational loan taken by you is deductible from your total income. There is no limit set for this amount.
- Medical expenses: An individual can claim a deduction of up to Rs 40,000 per annum in respect of expenditure incurred in the treatment of one of the following diseases:

Neurological diseases
Cancer
AIDS
Chronic renal failure
Haemophilia
Thalassaemia

- LTA: Travelling expenses incurred by the individual and his/her family on outstation trips can be claimed as LTA deductions twice in 4 years.

 
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