How to Save Income Tax ; Tax Planning Is No Child's Play. But It's Not the Accountant's Preserve Either. Here's a Guide to Help You Plan Your Investments, Reduce Tax Burden and Maximise Income.

Summary

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Picking investments that deliver healthy returns and also carry tax benefits can be quite a challenge for most taxpayers. Although, one should invest all round the year, most people end up making tax saving investments only towards the end of the financial year. In this haste, they often end up locking their savings into bad long- term plans. Considering that the maximum tax that can be saved from these investments is Rs 30,000 in a year, assessing the returns and other features of such investment options becomes a must. Above all, the returns should be able to beat inflation. No investment should be undertaken only for the sake of the tax benefits.

Money Today looks at the five best options for the last minute investors: equity linked savings scheme (ELSS), unit linked insurance plans (Ulips), public provident fund (PPF), real estate (funded through home loan) and pension schemes. But first let us understand the available tax benefits.

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Extract

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How to Save Income Tax ; Tax Planning Is No Child's Play. But It's Not the Accountant's Preserve Either. Here's a Guide to Help You Plan Your Investments, Reduce Tax Burden and Maximise Income.

The changes in the tax laws introduced in Budget 2005 have given investors higher flexibility in deciding how much to invest and where. Tax benefits which were provided as rebate-the investments could be reduced from the tax dues-until last year have now been changed to a deduction from the taxable income. A benefit that allows reduction from the tax due is rebate, whereas reduction from...

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