Personal Finance:

Tax Planning


An Individual needs to take the taxation into consideration at all times, from the stage of earning the income, incurring expenditure to the time of investing in various types of securities, deposits etc. Return on investment in the form of income, when received, attracts income tax under the Income Tax Act. Incidence of income tax depends on the nature of your investment, income and the quantum of other income like salary, rent from property, interest etc.

Other common sources of incomes are: interest on bank deposits, debentures, bonds, deposits with companies, provident fund (and PPF), NSC, dividend income from shares or from mutual funds, royalties, one time windfall gains, income from profession, business or pension. Income Tax act treats each one of these incomes separately and allows many deductions, exemptions etc. depending, mainly, upon the source of income. It is, therefore, necessary to learn and understand the Sections of Income Tax Act applicable to your source(s) of income BEFORE you invest and BEFORE you decide to incur any major expenditure.

One must take a keen interest in the annual budget exercise of Government of India (GOI) as the tools available for tax planning in India are a dynamic lot which undergo a change with every budget. The annual budget represents the desire of GOI to direct the savings into specific channels and areas. Various incentives, tax sops given away in every budget are the tools used to encourage individuals and corporates to direct their savings into these areas. You can use these sops to enhance the disposable income in your hands, thus serving the twin purposes of saving for your self and also help the society in growing in the desired direction.

One point that needs to be kept in mind is that managing your personal finance has nothing to do with tax avoidance. Taxes have to be paid and they must be paid as our dues to the society that makes life in an organised manner possible. However, a little tax planning can enable you to avail of all the avenues that our tax system provides you to save and grow.

Some other issues of importance for an individual are:

How to decide & customise bank accounts
Investment in real estate
Income management 
Investment Strategies 

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