How to Save Tax???

How to Save Tax???

Prudent tax planning is inevitable to enhance our disposable
income as taxes are eating p a substantial part of our income.Payment of tax is an
unpleasant thing but it can not e avoided because tax evasion is a punishable
offence.However,tax planning is legal and you can considerably reduce your tax liabilities by appropriate investment avenues.
Normally,income above the general exemption limit of Rs.110000 for men and Rs.145000 for women(it has been revised as Rs.1.50lakhs
and Rs.1.85 lakhs respectively in the union budget 08 -09) is subjected to income
tax at progressive rates. however money invested in certainv avenues can be used
for avenuss tax benefits on the one side and reasonable returns on the other.
lnvestmetes in tax saving mutual fund schemes (equity linked
saving schenmes -EISS), money put in unit linked lnsuranes plans( ULIP), premium
paid a year towards life insurance policies,contributions to Employees Provident
Fund(EPF) or Public Provident Funt(PPF) etc are all investment avenues through which you can avail tax exemption.Investments in these heads are exempted from
income Tax Act.You can put in the whole Rs.1 lakh as per Section 80C of the income Tax Act.You can put in the whole Rs.1 lakh in any of these options or spread the money under different heads.
From the risk and return perspective,investment in provident funds and
life insurance policies are less risky but the return will also be low.Currently,it is hovering around 8-8.5%.On the other side,investment in ELSS or ULIP could be very rewarding though the risk would be a little bit high.Magnum Tax Gain,HDFC Tax Saver,Sundaram BNP Paribas Tax Saver,Birla Equity Plan etc.. are a few among the top rated mutual fund plans for tax saving and attractive income .These schemes are providing an average annual return of over 50% for the last five years.
To avil tax exemption under all the above,you have to lock in your investment for a period of three year.
In addition to above,you avail tax exemption for another Rs.15000 of your income a year by investing a year by investing in Mediclaim policies.This exemption is under Section 80 D of the Income Tax Act.
Investments in housing property is another major avenue for saving your money from the taxman.Interest payment up to Rs.1.50lakh a year towards housing loan from recognised agencies could be exempted from tax liability.Exemption could also be claimed for principal payment,subject to the Rs.1 lakh ceiling under Section 80 C as atated above.