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The year has wound to an end and as we get close to a new financial year, lets ask ourselves how prepared are we for the coming year. You may see that people around you have suddenly emerged from their hibernation and are making a quick run to their financial advisors for their tax planning and Income Tax returns. When it comes to IT returns, the emphasis moves obviously to 'tax planning'. One needs to outline it well and make maximum use of the benefits offered. Lets find out what options are available to organize your earned cash and avail the tax benefits. One such alternative is 'Insurance'.
For instance, insurance cannot be viewed, as just a tax saving instrument as most of them wrongly think or view it to be like. The insurance protection component cannot be overlooked just to get the tax settlement. Now, if you have made up your mind to invest in insurance then why not choose an appropriate policy that will suit you perfectly. For example you can choose a retirement product if you are nearing the retirement phase or you could plan out an early retirement policy. In the bargain, you have planned your future as well your tax concern.
It is important to note that the conventional tax planning is not the only method of tax saving, within the given limited options available one can explore a lot more other options too. The schemes available under the section 80C are- Life Insurance, Public Provident Fund, Equity Linked Saving Schemes, National Saving Certificate, Kisan Vikas Patra.
Currently, under Section 80C -- "u/s 80CCC, & u/s 80CCD", the following benefits are available at the current year:
Individuals with an annual income of Rs 1,00,000 are exempt from tax; those falling in the income bracket of Rs 1,00,000-Rs 1,50,000 are subject to a tax of 10%. For those earning between Rs 1,50,000 to Rs 2,50,000 a 20% tax is charged and anything above Rs 2,50,000, a tax of 30% is paid. A relief is provided to the resident individual belonging to lower income group. A resident individual having taxable income up to Rs 100,000 is not subject to paying any income taxes. Such individual will be entitled to rebate equal to the amount of tax payable on taxable income up to Rs 1,00,000.
However, no such rebate will be available to an individual with the taxable income exceeding Rs 100,000. This will adversely affect individuals whose taxable income marginally exceeds Rs 100,000.
Now, the annual budget '06-'07 will welcome the new Exempt Exempt Tax (EET), wherein, individuals claiming income tax benefits under 80C will now have to pay taxes on withdrawals. Withdrawals before the expiry of the term will also be taxed. However for the first time investors will have the option to switch between the savings instruments which are mentioned above and the good news is that no tax will be levied for this switching over between the saving instruments. Gratuity payments and superannuation funds will be exempt from this system. All the long term saving instruments are subject to the EET system. However, Short and medium term savings certificates and infrastructure bonds are expected to be outside the EET umbrella.
The new EET system will be applicable from the new financial year or soon after the budget is announced. So wasting no more time, make a quick decision right now. The clock is ticking; make a run for it now.
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