Income Tax Planning, tax Savings

As the financial year will come to end by March 2009 everyone needs to plan for the their Income Tax Planning..

 

Please read folloing useful points

 

- Income Tax savings is the easiest and the best short term savings anyone can do.

 

- Income Tax savings is also a tool for building your longterm investments like Retirement planning etc.

 

- First calculate the applicable Tax on your income as per bracket

 

- Check if you are using the maximum exemptions possible under sec 10 & 17 that include Transport Allowance, Medical Expenses, HRA (rental recepipts), Education allowance. Try best with all ways to get all these exemptions to the maximum level.. These sections are the easiest exemptions.

 

- Next If you have home loan then look for exemptions under section 8A (interest on home loan) & 8C (principal amount on home loan)

 

- If you have life Insurance then it is exempted under sec 8C and medical insurance (for you, your family and your parents) under sec. 8A

 

Further Life Insurance: I suggest that you treat Life insurance and Investment saperately. While taking Life Insurance, take the policies that five lowest  premium and no maturity value. Go for Whole Life Limited Payment policy for pure Insurance or Term Insurance.

 

Investments: For investments go for ELSS(Equity Linked Savings Scheme) with SIP (Systematic Investment Plan)  This is one of the best ways to invest and save tax. e.g. When you invest in this scheme you get immediate benefit in terms of the Tax exemption and further returns that will be always better then any endowment insurance policy or FD or PF. Even though stock markets keep flatuating the average returns over long period in Indian equity markets is more then 12%.