"The avoidance of taxes is the only intellectual pursuit that still carries any reward" - John Maynard Keynes.
The above quote clearly states that reducing tax liability is a rewarding act and it can be done effectively through tax planning. The ultimate goal of any individual is to reduce his tax liability and it can be achieved through tax planning.
Taxes are generally defined as a codified system of laws that describes government levies on economic transactions according to “income tax Act 1961”. Government requires funds, for various reasons like development of nation, meeting contingencies etc and for that it charges tax to common people. There are numerable taxes levied on a common man according to the Indian tax law, which are all divided basically in the two parts :
1. Direct tax
2. Indirect tax
Direct tax is the tax which is charged directly on the tax payer. It is that tax which is deducted from one's salary. Indirect tax is the tax which is not directly levied on the income of the consumer. This is levied by the State on consumption, expenditure, privilege, or right but not on income or property. Customs duties, excise duties, sales tax or value added tax (VAT) are some of its examples.
Whether you run a business, work for a company or are self employed, Tax planning is important. give a missed call on 022 6181 6111
Tax planning is an activity usually performed in the last 6 months of the year. It is something more than just saving of taxes. Tax-planning is as much about contributing to financial goals as it is about reducing ones tax liability.
There is a three stepped process for planning your tax :
The easiest and quickest way to go about tax-planning is to first get a fix on liabilities that earn a tax benefit. For example, the loan avenue over here that qualifies for a tax benefit is home loans (maximum limit of Rs 100,000 on repayment of principal). So if there is an outstanding home loan, one needs to isolate the principal amount from the interest (in the EMI – equated monthly installment) to calculate the tax savings under Section 80C
The second logical step is to calculate your annual contribution to EPF (employees’ provident fund) and life insurance premium. Add EPF’s amount to your annual life insurance premium, if any. We have not considered PPF (public provident fund) as a fixed investment simply because it’s not fixed as investors can choose to increase/decrease their contribution up to a maximum of Rs 1, 00, 000 (there is a minimum annual contribution of Rs 500 to keep the account active).
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Once you have a fix on your liability (principal amount on home loan), EPF and life insurance contributions, you need to compute how much is still available under the Section 80C ceiling of Rs 100,000. The balance must be invested in avenues that suit your risk profile and help you fulfill your investment objectives. For instance, if you can take on risk and plan to set aside money for your child’s education over the next 10 years, then investing in tax-saving funds (also known as ELSS – equity-linked saving schemes) could be the answer. If you can take on only moderate risk, then you could divide the money between tax-saving funds and PPF. The idea is that you should invest exactly where your risk appetite and investment objectives permit you to invest.
To learn more about tax planning and how to reduce your tax liability, give a missed call on 022 6181 6111
The goal of tax planning is to arrange financial affairs so as to minimize one’s taxes :
Few investment products which help us to save our tax :
No problem if you have already invested without knowing the deductions in various sections, give a missed call on 022 6181 6111
Who are liable to pay Income tax in India?Any individual, corporate, firm, society or any judicial legal entity having income earned & received in India will be liable to pay Income tax to the Income tax Department of India.
Who is an assessee under Income Tax Act?Assessee is a person by whom Income tax is payable under Income Tax Act, 1961 of India.
Under which heads of income tax Act is income taxable?•Salary Income •House Property Income •Income from business or profession •Income from sale of capital assets •Other income If your income falls into any of the head s given above call us on 080 67974000 and take our advice on planning your taxes!
Which period is considered as an Assessment year under Income Tax Act?Let's say Financial Year is from 1st April-2011 to 31st March-2012, then Assessment year for Income Tax purpose is 1st April 2012 to 31st March 2013. In this case Financial Year would be called previous year.
Is it compulsory for business/self employed entities to maintain books of accounts?Yes, if you are carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or any other notified profession. And Yes, IF you are carrying on business or profession (other than professions mentioned earlier) and IF the income from business or profession exceeds Rs.1,20,000/- or the total sales, turnover or gross receipts in the business or profession exceeds Rs. 10 lakhs in any one of the three years immediately preceding the previous year. To know more about Tax Planning, call us on 080 67974000
