What is “Tax Planning” for you ?
Now that we are exactly half way through this financial year , I would like to share my view points on tax planning . In my discussion with clients ,very often I face a question :
“What is the best way to plan my taxes ?“
Conveniently , I reply to this question by asking another question –
“What Is Tax Planning for you ?”
Reflex action : “ Obviously , minimizing my tax liability on income , the 80 C”…
But, is Tax Planning really limited to planning 80C?
I have tried to analyze this question in many ways . While people in 10% and 20% bracket may still plan , and I advice them to use term plan and PPF to exhaust the limit, but for people in 30% tax bracket , it can be safely concluded that in such cases ,tax planning ( of 80C to U) is not really required . It is already exhausted before one realizes .
The PF contributions,Voluntary PF ,Insurance policies ,Home loan repayment ,home purchase ( Stamp fee and registration of house) ,Children’s tuition fees ,most of these by default exhaust our limit .
So, does it mean Tax Planning is not relevant ?
Definitely it is . Since, Tax planning is not limited to the above sections . It is primarily to do with the way one puts their surplus money to use .
When we save our surplus, the choice of products determine whether they are tax effective or not .How to minimize our tax liability ,depends where we are routing the surplus to .
While the above are primarily with financial investments , physical assets like gold , real estate follow a taxation similar to debt . Only difference being , the minimum holding period is 3 years instead of 1 year .
Every Rupee saved from such decisions ,is a Rupee earned .
Please feel free to write back ,if you have any questions . Would be glad to be of assistance