Does your tax-saving plan start in December and end with last-minute investments? You could be losing out on higher deductions and better returns
This article is not so much about prudent investment options as it is about getting your tax-saving plans right. Let us try to understand the problem, through the example of Mr X, who landed a job at an IT firm as a business analyst in FY14-15.
Mr X has a cost-to-company (CTC) of Rs 4,50,000, but is not aware about his tax liabilities and therefore, has not planned any tax-saving investments beyond the relief offered u/s 10 of the Income-Tax Act (transport allowance, medical allowance and LTA deductions) and his employee provident fund deductions.
Prima facie, Mr X’s approach might seem reasonable and his above deductions sufficient. Considering that his gross taxable income (after deductions) is below Rs 5 lakh, he is allowed a further rebate of Rs 2,000 u/s 87(a), which brings the final tax liability to Rs 4,819 (See Table 2), or a little over Rs 400 as monthly TDS. Naturally, he is unperturbed and fails to plan his investments. If we consider other factors such as performance bonuses, increments and others, the above math may fall flat, indicating that tax liability alone is not a prod for investment planning. If, for instance, Mr X also gets 10% of is CTC as a goodwill bonus in 2014-15 itself (it is taxable the same year), the tax liability could almost double to Rs 9,454 — and that’s after his Rs 2,000 rebate!
One increment later…
هذه القصة مأخوذة من طبعة November 2016 من The Finapolis.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك ? تسجيل الدخول
هذه القصة مأخوذة من طبعة November 2016 من The Finapolis.
ابدأ النسخة التجريبية المجانية من Magzter GOLD لمدة 7 أيام للوصول إلى آلاف القصص المتميزة المنسقة وأكثر من 9,000 مجلة وصحيفة.
بالفعل مشترك? تسجيل الدخول
7 Ways to Prevent Text Neck
Our head is heavier at an angle than it is at a neutral position. That means our increasing usage of smartphones for reading, texting, etc is putting undue pressure on our spine
How To Take Your Networking To Next Level
Networking is one of the best ways to use your time
5 Fun Ways To Save Money
There are several simple ways to reduce spending and rack up more cash. Sukanta Kundu lists some interesting ones.
In Search of Higher Returns Amid Falling Rates
As Bank Deposit Rates Fall, Even Conservative Investors Are Switching Assets. Where Can They Go?
National Savings Certificates Help as Interest Rates Fall
National Savings Certificates (NSCs) have been among the most popular tax-saving options for ages. In spite of the advent of market-linked investment products such as equity-linked savings schemes (ELSS), the certificates have retained their charm for certain sections of society. In this column, let us discuss the various facets of this special instrument of investment.
What Drives Us to Invest?
I had made the journey from economics to finance. As part of Keynesian economics, we were taught about the three motives to hold money: the transactions motive, the precautionary motive and the speculative motive; all through my teaching career that remained part of my Keynesian economics. But two decades, later when I immersed myself into the world of investment, I had to develop my own tools to understand the new discipline and make my investors understand the working of their own minds. One night as lay turning on my back, poring over the day’s happenings, suddenly I made a strong connection between what I had studied years back and the problem I was grappling with now: the motives.
Ask The Finapolis
Col. Sanjeev Govila (retd) of Hum Fauji Investments answers readers’ queries on investments, taxation and personal finance. Do you have a question you want answered? Email your question to feedback@thefinapolis.com
Input Tax Credit To Benefit End-customer
Looking at the scale of India, it is reasonable to expect 3-5 years for the system to stabilize
Will GST Really Spike Up Your Bills?
As goods and service providers can claim input tax credit, your net tax bill will reduce say experts
The Bull Run Is Here To Stay
Karvy Finapolis’ event —“Is this the mother of all bull runs?” — evoked a thunderous response from investing public recently in Hyderabad.