Tax Planning –
Tax planning refers to financial planning for tax efficiency. It aims to reduce one’s tax liabilities and optimally utilize tax exemptions, tax rebates, and benefits as much as possible. Tax planning includes making financial and business decisions to minimise the incidence of tax.
It also conforms to the provisions under taxation laws, thereby minimizing any litigation. One of the biggest benefits of tax planning is that the returns can be directed to investments.
Under Indian taxation laws, the income from sale and purchase of securities is taxed in 4 manners. Normal tax slab for FNO transactions , 15 % tax slab for short term capital gains , 10% tax slab for long term capital gains and 20 per cent for unlisted shares.
So proper classification and planning is required.
These options provide a variety of exclusions and deductions that help to reduce the overall tax burden. Deductions are provided from Sections 80C to 80U, and eligible taxpayers can claim them. These deductions are applied to the total amount of tax owed.
It is totally legal and, in fact, a wise decision when tax planning is done within the boundaries set by the respective authorities.
1. Short and Long Range Tax Planning
2. Permissive Tax Planning
3. Purposive Tax Planning
– Tax Saving option under Section 80C
– Tax Saving option under Section 80 D
– Tax Saving option under Section 80 E
– Claiming HRA Exemption
Invest in tax-saving instruments. There exists a wide range of deductions available to eligible taxpayers in Sections 80C through 80U of the Income Tax Act, 1961. Other options such as deductions and tax credits are listed under the Income Tax Act, 1961. Investment options include Provident Public Fund (PPF), Equity Linked Saving Schemes (ELSS) in mutual funds, National Saving Certificates (NSC) or 5-year bank deposits. Life Insurance, health insurance premiums and home loan payments can let you avail tax savings.