Tax Planning
Advance tax planning brings in clarity, certainty and financial stability to business. Taxser advisors with significant knowledge base and practical exposure in tax administration would help in devising appropriate tax strategy and handhold all business establishments in discharging their tax obligations.
Our team would strive to provide an integrated tax planning and compliance system so as to enable all sectors of business, trade to grow and expand. Also ,Tax planning is a logical analysis of your income and expenditure, which helps you to invest optimally so you can save money when paying taxes. Quite simply, this process enables you to think about your tax payments right at the start of the year, rather than keep it for the eleventh hour. The aim of tax planning is thus, to manage your money in such a way that you reduce the amount you pay as tax.
Here are the steps of the tax planning process,
- First take into account your total income. This is simply the starting point of the process and involves doing an honest and accurate calculation of your annual and monthly income.
- See exactly how much of it is taxable. Your entire take-home pay is not taxable. Some parts of your salary, like allowances for house rent or travel, are not taxable. On the other hand, any profit you make from your investments could add to your taxable income. Thus, understanding your actual taxable income is a must.
- Avail deductions to reduce your total taxable income. This can be done through structuring your salary and planning your investments right. For example, profits from a debt fund held for over three years is taxed at 20% after indexation. Interest from a fixed deposit, on the other hand, is taxed at the same rate as your income tax. So if you fall in the 30% bracket, debt funds may be a more tax-friendly option for you.
- Lastly, invest some money in tax-saving instruments. For this, you will need to read up on Section 80 of the Income Tax Act. This mentions all tax-related rules. There are many investment options that are available for effective tax planning like Provident Public Fund (PPF), Equity Linked Saving Schemes (ELSS) or National Saving Certificates (NSC). Even your Life insurance , Health insurance and home loan payments can help you avail tax savings.
Tax Planning Understanding
Here are the three types of tax planning:
- Purposive tax planning
- Permissive tax planning
- Long range and Short range tax planning
Purposive tax planning:
Purposive tax planning means applying tax provisions in an intellectual manner so to avail the tax benefits based on national priorities and with specific objectives.
Permissive tax planning:
Permissive tax planning refers to the plans which are permissible under various provisions of the law. In other words, it means planning made as per provision of the taxation laws.
Long range and Short range tax planning:
Short-range planning means planning made annually to fulfill the limited or specific objectives. It is executed at the end of the year to reduce taxable income legally. Long range tax planning is done at the beginning or the income year to be followed around the year. Long term planning does not help immediately, for example transfer of assets without consideration to minor child. In this case, the income will be combined to transferor up to the child in minor but once the child turns 18, this will be the child’s income.