Summary of Tax Planning in India
Tax planning means the summary of an individual’s financial condition for planning his finances from a tax efficiency point of view. This process allows a tax payer to utilize and make the best use of tax exemptions, deductions for minimizing their tax liability annually. This process makes sure that no individual knowingly does tax evasion and maintains the lawful way of reducing tax liabilities.
Tax Planning in India
The Indian citizens are obliged to pay tax every year so that the government can invest the tax for the development of the nation. The government not only serves the nation but also helps the citizens by saving a portion of the tax paid by the citizens. The citizens are allowed to utilize the saved portion through investment which is often the most useful option for them.
The Indian government allows a huge number of deductions and tax saving options for all of its taxpayers. These deductions help the citizens by limiting their tax liability. The deductions are mainly available from Sections 80C to 80U. Tax planning is the only lawful way of reducing tax liabilities for an Indian citizen.
Below, we will provide a simple representation about what could be done with the sections 80C and 80D in case of tax planning.
Before we go further, the main fact to be considered here is that every individual doesn’t have the same type of requirements and risk taking abilities. So, the facts mentioned below or commented below is just a simple representation of what could be done with section 80C and 80D.
Here we must mention that eligible taxpayers under 80C section can claim deductions of amount of about Rs. 1.5 lakh per year and for 80D the amount is Rs. 35, 000.
Details and Comments about Tax Planning
Below we will try to showcase a simple representation of the things that could be done with Section 80C and Section 80D with the help of a table. We will provide the lists of the investment opportunities along with the monthly and yearly outgo. Then we will list our remarks about the things that could be done with these sections. But again you should consider it as only a draft and it is recommendable that you might create a draft for yourself according to your needs. The table below is just a basic one and will not meet the needs of everybody.
|Investment Opportunity||Section||Monthly Outgo||Yearly Outgo||Remarks|
|Employee Provident Fund||80C||1,440||17,280||This is a mandatory sector and the amount is 12% of basic pay. For this calculation, the projected basic pay is 12,000.|
|Voluntary Provident Fund||80C||960||11,520||This sector is originally voluntary and the maximum amount an individual may contribute is 88% of their basic pay. This calculation is expected at 8% of basic pay.|
|Public Provident Fund||80C||2,000||24,000||The rate of this sector is fixed by the government annually and the current rate is 8.7%.|
|Term Insurance||80C||–||10,000||The premium is for a fit man of 25 years ( One crore coverage for 30 years)|
|Equity Linked Savings scheme||80C||3,000||36,000||The money in this sector is protected for three years and the market dependent and revenues are also unguaranteed.|
|Health Insurance Provided by TCS||80D||–||18,000-21,000||The rate of this sector has been revised recently. Thus, we are expecting a sum of 18, 000 -21, 000 which will cover an individual, their spouse, a children of them and both the parents of the individual.|
|Health Insurance with third Party Vendors||80D||–||10,000||In addition to TCS HIS an additional cover of 3 lakhs may be provided for an individual, their spouse and a child of them.|
|Cumulative Total||80C||–||98,800||The maximum amount which is allowable for the Section 80C is Rs. 1 lakh and we have covered 98, 800 of it.|
|Cumulative Total||80D||–||31,000||The maximum amount which is allowable for the Section 80D is Rs. 35, 000.|
The table provided above represents a basic calculation and every individual will be able to customize it according to their own needs. We have also excluded several opportunities in the above table.
- Major Refund for Housing Loan
- Interest Paid on Housing Loan
- Interest Paid on Education Loan
- Teaching Fees for the kids
- Registration charges and Stamp dues
Besides the excluded avenues or opportunities the above table about the tax planning actually shows the basic way of reducing the liabilities of tax. The need for every individual is dissimilar but all the individuals will be able to get a basic view of the points to be noticed for tax planning from the above table. Tax planning mainly is an option provided to the citizens of India so that they would be able to reduce their tax liabilities legally instead of avoiding tax illegally or unknowingly.
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