Tax Planning

The draconian Indian taxation laws is known to confuse and exhaust many. Most of us do not know the benefits provided by government and hence fail to save tax. With proper Knowledge of tax laws, we can save lots of money by tax planning. 

Since most of us are salaried individuals, I would share some tips for saving tax for this category.

1) Section 80 deductions: There are several deductions available under this section which qualify as a deduction and thus reduces the taxable income. For example any payment to Life insurance policies, housing loan etc qualifies as deduction under section 80c. Similarly any donations made to certain organizations would qualify for deduction under section 80g. Hence one should try to utilise these benefits properly.

2) Relief u/s 89 : Many people receive salary in arrears or in advance. Now the rule for taxing salary income is when received or due whichever is earlier. So if arrear salary of say year 2013 is received in 2015 then that arrears will be taxed in year of receipt (2015) if not taxed on due basis in year 2013. Now generally tax rates rise over the years and hence the burden of tax on arrears increase. Hence relief for the additional tax burden on arrears can be claimed under section 89.

3) Investment in Stock market : The government is really keen to get more investments in stock market and that too for long term. Hence anybody who invests in stocks for a period more than one year and later sells it off, any profit arising out of it will be exempt from tax.

The above are some of the most easiest and common methods for tax saving. There are much more which will be continued in next lesson.