The annual Union Budget contains latest modifications in the India tax structure which is going to help the tax payer in saving more money through the updated tax deductions, tax exemptions, and tax rebate plans. Proper tax planning in India will assist the tax payer in the achievement of this goal.
Tax Planning in India for Small Income Groups:
It is essential for individuals who are left with comparatively small funds at the end of the month to resort to tax planning in India. They will be immensely benefited if they invest a substantial amount of their funds in tax saving schemes especially in equity funds, as individuals investing in the equity funds schemes are exempted from the payment of dividend tax. Therefore, such investors appear to be in a better position than the companies that have issued these equity funds schemes, as the companies are required to pay taxes on the dividend payments at the rate of 10.2% to the central government. However, only those equity investments schemes that allocate 50% of the fund's principal amount in equity are allowed to enjoy exemption from the payment of dividend tax. Those who are confident of carrying the payment of insurance premia for a long time span, will be benefited by applying for pure term insurance schemes as the long tenure of the schemes, serve to reduce the amount of monthly insurance premiums.
Tax Planning in India for Aged People:
Tax planning in India will also help aged people nearing retirement who can decide to invest in the popularly accepted tax saving schemes like National Savings Certificate and Kisan Vikas Patra to fulfill their immediate requirements and provide ample opportunity for the fulfillment of their long term needs. The National Savings Certificate scheme stretches over a period of 6 years only and allows interest at the rate of 8%. If the individual invests in the National Savings Certificate scheme 6 years before retirement, the National Savings Certificate has either matured or is nearing maturity by the time the individual retires. The interest payment of 8% will fulfill the immediate needs of the certificate holder and his/her long-term needs will be fulfilled when he gets the deposit back at the maturity of the certificate. The other advantage of certificate is that the interest income from the certificate qualifies for tax deductions under section 80 L of the Income Tax Act, 1961. The Kisan Vikas Patra is equally helpful for people nearing retirement as the money invested in this scheme doubles in a span of 8 years. Hence, investing in this scheme a little before retirement will help the investor receive a large sum of money during the time of retirement or after retirement, when the scheme matures.
Tax Planning in India Calculations:
The most important aspect that needs to be considered before engaging oneself in tax planning is the proper assessment of the amount of money that will be deducted from the income of an individual and the sum of money that would be left with him to invest in different schemes to earn interest income and save taxes. For example, any individual whose income is Rs. 210,000, will not be required to pay any interest on the first Rs.100,000. Of the remaining Rs. 110,000, Rs. 50,000 will be taxed at the rate of 10% which means he will be charged Rs.5,000 for Rs.50,000. The remaining Rs. 60,000 will be taxed at the rate of 20% and the resulting tax amount will be Rs.12,000. Hence, the total income tax charged from the individual would be Rs. 5,000 + Rs.12,000 = Rs. 17,000.
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