We are into last quarter of financial year 2010-2011 and most of the taxpayers will be looking for tax saving instrument. It is a long history that most of the people plan at the end of the year and end up buying instrument, which may not be in line of their financial need. Nearly 70% of the life insurance business happens in the last quarter of the year and this quarter is like a season for insurance professionals. We all know very well that every year we have to save 1 lakh for tax benefits u/s 80-C of the income tax act, but still we wait till end and end up buying wrong product. It is not at all advisable to wait till end for getting tax benefit. But, still if you are looking for tax saving instrument than here are some tips for tax planning.
> Calculate what the exact amount is still pending for investment to get the benefit u/s 80-C. If you are not sure than consult your CA or tax consultant.
> Buy term insurance, which is very much important and has to be given top priority. Calculate exact cover you require and buy risk cover for the protection & security of your family.
> Avoid other insurance products, as you will be not having time to assess and compare the products for the long-term benefit of yourself and your family. Insurance products are loaded with irrecoverable charges, which need to be assessed & analyzed. Do not commit yourself for long-term premium payments unless you very well understand the features of products you are buying.
> Finalize your asset allocation and be sure where your investment has to go. Whether you would like to go for risky products for higher returns or want capital protection fund.
> Business man and professional must consider P.P.F. investment for tax saving, as it gives 8% tax free returns which are the best in debt category. You can deposit up to Rs. 70,000 per annum in one financial year.
> Principal payment of your home loan EMI is also eligible for tax benefit.
> N.S.C. interest is also eligible for tax benefit but the interest is also chargeable to tax as income from other source.
> Tuition fees for two children`s are also eligible for tax benefit.
> Mutual fund ELSS schemes are best for those who would like to invest in equity and want to participate in growth story of India. ELSS schemes have lowest lock in period of 3 years.
> Do not buy any fixed income instruments with lock in period of 5 years. Rather invest in ELSS schemes of mutual fund, as the 5-year time horizon is very good for equity investment.
> You can also buy health insurance products or increase your family cover for mediclaim and get additional tax benefit of Rs. 15,000 u/s 80-D of the income tax act.
You also get additional Rs. 15,000 benefit for covering your parents (Rs. 20,000 if they are senior citizens).
> You can also avail the benefit of investing in infrastructure bond for onetime benefit for F.Y. 2010-2011 u/s 80-CCF up to Rs. 20,000.
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