Investment Shastra

Tax Plan that best suits your stage of life

Come January – February and everybody starts to think of the income taxes. Income taxes, most likely are one of the largest expense one encounters over lifetime, may be bigger than owning a home or the cost of sending kids to college. You must be thinking that why even bother about taxes at this time of the year? After all, it’s just October. Tax planning demands attention only when your employer sends the tax deduction notice in the beginning of the year or, during the last 1- 2 months of the financial year.

But, shouldn’t you be more careful in effectively planning your tax commitments to ensure you don’t pay more than your fair share. After all, effective tax planning not only facilitates in saving taxes but also provides decent returns. Tax planning involves selecting the right tax saving instruments and making wise investment decisions in the process.

For instance, when one buys a house through a bank loan, benefits of tax deduction on the interest amount and well as repayment of principal can be availed. One can claim up to Rs. 250,000 or the actual interest repaid whichever is lower. Principal can be claimed up to the maximum of Rs. 100,000 under Section 80C.  In the same way, various tax incentives for reduction of tax liability can be looked at; all of which requires some planning.

You must be considering why one should read another article on tax planning, when already there in no dearth of them. Well, the difference we are trying to explain here, is the tax planning suitable to individuals according to the various stages of life they are currently in. 80% allocation to Equity linked saving scheme (ELSS) for tax saving may be an ideal choice for a young graduate, whereas for a retired person, this should not exceed 15-20% of the total amount allocated for tax saving. All in all, Tax Planning is a significant decision and its impact becomes much more pronounced considering which stage of life an individual is in.

Here comes the ‘Four article series’, where we will explore the suitability of various tax saving instruments at various stages of life:

So, stay tuned to our series on Tax planning and plan your taxes judiciously.

See you next week on Friday with our first article in the ‘Tax Planning’ series.

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