Tax Planning 2012

Taxation has become one of the most cumbersome topics of discussion because of the ever changing policies and norms. However, one can plan efficiently using some perfect tools and factors and earn the maximum benefit from tax saving investments. 

The tax planning season is about to start and people are looking around to make investments to minimize their tax liability. Tax planning is an ongoing process and should not be considered as an annual process. There is a lack of awareness among people about the different incentives, allowances and rebates they can avail under the Income Tax Act.

Strategic Tax Planning

Taxation has become one of the most cumbersome topics of discussion because of the ever changing policies and norms. However, one can plan efficiently using some perfect tools and factors and earn the maximum benefit from tax saving investments. There is a need of devoting adequate time and effort to plan and be aware of the benefits that can be availed.

Tax Planning Tools

Public Provident Fund is still the unbeaten and the first option in tax saving options. Apart from PPF, there are some more options which are becoming popular. Some of the prominent ones are listed below:

Public Provident Fund

Public Provident Fund often abbreviated as PPF falls under Section 80C deductions. It has been an all time-favorite. The maximum deduction amount can be Rs. 1,00,000 and no tax is to be paid on maturity. Also,the amount invested in this scheme is returned without any interest.

• Minimum Investment range - Rs. 500 p.a

Maximum Investment range - Rs. 70,000 p.a

• Yield rate - 8.5 percent p.a compounded annually
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The amount cannot be withdrawn till 15 years, however partial withdrawal is possible after 5 years.

Insurance

One can avail tax rebates by investing in various insurance options. There are some government owned schemes like Life Insurance Corporation of India. Many private insurance companies are also present in the market like Bharti AXA Life Insurance, Bajaj Allianz, AVIVA, ICICI Prudential to name a few.

Post Office Deposits

Post Offices also provide with some excellent schemes which are covered under Section 80C of the IT act. These are generally short term schemes with tenure ranging from 1-5 years. The most common post office based tax saving tools are listed below:

• Post Office Time Deposit
• Post Office Recurring Deposit

• National Savings Scheme [NSS]

• National Savings Certificate [NSC]

• Kisan Vikas Patra - [KVP]

• Public Provident Fund [PPF]

Equity Linked Savings Scheme (ELSS)

This is a relatively a new tool and has some risks involved. ELSS investments are popular not only because of its effectiveness in controlling tax liability but also for tax free assured returns which it offers.