Thursday, March 10, 2011

the struggle of salaried class to save money for tax exemption..... but

As the year end of the Financial year approaches, Companies look at their top line and try to close at higher figures.  For individuals it is the time to give deft touches to their income tax planning and savings.

Many of us would have made the cardinal mistake of taking Life insurance and medical policies either during March or to start from April.  Thus the month of March would be one of financial scarcity – there would be avenues under defined Sections of Income Tax Act that allow us to save tax by investing in various qualified instruments but some of us would be searching for money to make those investments.  Though it may not sound prudent, some of my friends have taken loans to purchase NSC and other instruments, would pledge them or take loan on them later to pay back the principal  - all in the hope of getting some IT benefits. 

Presently Sec 80C of IT Act is the major avenue for tax exemption that allows deduction up to Rs. 1 lakh.  PPF, LIC, Pension plans, ELSS, principal repayment of housing loans, NSC, children education payment all would fall under this section.   It would be ideal to utilize all the sops available – use them to the fullest extent – entire 80C by saving 1 lac and then think beyond Sec 80C  –which will be home loan to avail interest payments under Sec 24.  Subscribe to Infrastructure bonds for an additional Rs.20000/- under Sec 80 CCF.  Medical premium for Sellf and family upto Rs.15000/- pa under Sec D and additional Rs.20000/- is you paying premium for your dependent parents who would be senior citizens under Sec 80D.   Claim for HRA  if you are living in a rented house.

If you have some money left and if you have the mind, do donate to specified funds / institutions and become eligible for tax benefits under Sec 80G.   I am no Tax guru and there could be some more avenues still open.   But as you struggle to do all these, especially with your March salary or worser still, if your Company closes its door mid March, when you may have to juggle with all these with your Feb salary – do not, do not read newspapers or see TV headlines.  

There are scams  and more scams flowing like uninterrupted tidal waves and the amounts are mind boggling – now a days they are thousands and lakhs of crores.  For the uninformed one Crore is Rs.1 followed by 7  zeroes  - don’t take out a calculator or write to recheck this.  

This week, the Apex Court mulled on invoking terror and other stringent penal charges against the Pune stud farm owner who has been accused of massive money laundering and tax evasion and for his alleged links with arm dealers and people link to terror activities.  The reports suggest that he is India’s largest tax defaulter with dues allegedly over Rs.50000 crore (500 billion) .  This man claims to be a scrap dealer with annual income of 30 lakhs.  The amount shown as tax evaded was from the govt sources dating back to 2009 and was disclosed in the list of tax defaulters in Rajya Sabha.

Horse racing is an equestrian sport followed all over the World and in India horse races are famous in Ooty, Chennai, Hyderabad, Bangalore, Mumbai and Pune.  A stud farm is an establishment of selective breeding of livestock.  The parentage of the race horses are of significance and age of horse is reckoned from Jan of each year.

This is the time for the salaried class to go stand in Queues and ensure payment of Income Tax – lest march end, you are sure to get a thinner salary than your previous months.

Regards – S. Sampathkumar.

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