Let us all welcome the year 2013 with varied ideas to bring home tax planning for you and your family and also take you through Investment Strategies for investing your money.
By Subhash Lakhotia, Tax Guru : CNBC Awaaz, Tax & Investment Consultant
Let us all welcome the year 2013 with varied ideas to bring home tax planning for you and your family and also take you through Investment Strategies for investing your money. The following thirteen important Investment Tips for the year 2013 will surely help you to achieve your desired results :-
1. Income-tax file for one and all:
In whose name to make the investment – yes, this should be the first point in the back of your mind before planning investment strategies for 2013, it is time now for every tax payer of the country to make a resolution to have a separate independent Income-tax File for every member in the family. The objective of this is to achieve tax planning and cut down on your income-tax payments. Firstly think of your wife and if she does not have till now a separate independent Income-tax File, then start of having such independent Income-tax File for your wife. The concept of gift and loans in the name of your wife will help you to achieve this. However, do remember that your wife can receive gift from any relative other than her husband, her father in law and her mother in law. However, wife is free to take loan with reasonable interest from anyone including the husband. Similarly adopt the concept of gifting your major children and start having separate independent Income-tax File for your major children.
2. Investments for Hindu Undivided Family tax file in your kitty
Investments made by your Hindu Undivided Family can bring rich dividends for you in the year 2013. If you are a Hindu, then it is time now to find out whether you have a separate independent Income-tax File of your Hindu Undivided Family. If still now you have not been instrumental in opening a separate Income-tax File for your Hindu Undivided Family, then right now is the time when you should start such separate Income-tax File in your family so that it helps you in the process of tax planning. The HUF file apart from enjoying the basic income-tax exemption of Rs. 2,00,000 will also continue to enjoy tax deduction in terms of section 80C as well as deduction for interest on housing loans. Also do remember that your HUF file can come into existence whether you have a son or just a daughter and even if you do not have any children, still your HUF file can come into existence right now.
3. Plan for Investments for your minor children
If you are having a minor child or a grand child, plan right now the different strategies for the safety and security of your minor child in particular. If you want to have lots of income and wealth in the name of the minor child and would still like no clubbing of the income of the minor child, then it is time now to think of creating a separate independent hundred per cent “Specific Beneficiary Trust” in the name of the minor child based on the principles enunciated by the various courts of India including the Supreme Court of India so that the income of the minor child with special terms and conditions mentioned in the Trust Deed is not clubbed with the income of the parents. It is also possible for you to think of starting a PPF account in the name of the minor child for his or her safety and also do not forget to take out Life Insurance Policies specially in the name of your minor child which will help the process of investment strategy in the years to come for the safety, security of your loving children.
4. Deposits in savings bank account:
In the year 2013 also consider keeping money in the Savings Bank Account specially because the interest rates in the Savings Bank Account have gone up and moreover the biggest advantage is that from the Financial Year 2012-13 the interest income from Deposits in Savings Bank Account in Bank, a Co-operative Society and a Post Office will be exempted up to Rs. 10,000 as per section 80 TTA of the Income –tax Act, 1961. This benefit is available to Individuals and Hindu Undivided Families. The “Time Deposits” interest income would not enjoy the deduction.
5. Zero Coupon Bond:
Think of investing in Zero Coupon Bond in the year 2013 and it should be taken as a preferred tool of instrument of investment specially by persons not interested in regular income. Generally the maturity time of Zero Coupon Bond is ten years. Also look into the tax planning aspect at the time of maturity. Because of the benefit of Cost Inflation Index tax will be virtually nil on your income from Zero Coupon Bond at the time of maturity. It is also good to gift Zero Coupon Bonds to your minor children aged eight years and above.
6. Tax free bonds:
If you are coming in the highest income bracket, namely if you are having income exceeding Rs. 10 lakhs in a year, then surely it is worthwhile for you to make your investment in tax free bonds specially if you calculate the impact of income-tax savings on the same. The investment in the year 2013 in tax free bonds would be better than Bank Fixed Deposits.
7. Postal Instruments:
Do invest in Postal Office Instruments like National Savings Certificate VIII issue, National Savings Certificates IX issue, Post Office Time Deposit Receipts, as well as in Senior Citizen Savings Scheme specially keeping in view the aspects connected with tax deduction under section 80C and also the rise in the interest rates. The above items from Post Office will be eligible for 80C deduction. There has also been some increase recently in the interest of these investments.
8. Continue investment in Public Provident Fund:
In the year 2013 also please continue to keep your investment in Public Provident Fund Account specially because of the fact that the interest income from Public Provident Fund will now be 8.8 per cent. Moreover, such income will continue to be exempted from income-tax. Also do open Public Provident Fund Account specially for your minor children and your spouse. However, the total investment in Public Provident Fund Account for you and your minor children taken together in a financial year should not exceed Rs.1 lakh.
9. Real Estate Investments for the family:
In case you do not yet own your own residential house property then it is time now to start investing in new residential house property so that you can have your dream house. The investment in residential property would also bring home for you special tax deduction under section 24 for interest payment on loan for residential property. The maximum deduction would be Rs.1,50,000 for interest payment. Besides, the repayment housing loan also would enjoy tax deduction under section 80C. It would be better to buy a house in the name of two or more family members so that each one can enjoy tax deduction. From tax angle it would not be worth just to buy a piece of land because no tax benefit is available only on land purchase.
10. Time to vigorously think on investments in NPS:
Please focus your investment strategy for the year 2013 on investment vistas connected with New Pension Scheme. Although by now the New Pension Scheme popularly known as NPS is into operation for the last couple of years. However, still now NPS investment has not become the darling of tax payers of India. However, it is time now to show your love and affection to the investment in new Pension Scheme. It is time now for you to study the new provisions in greater detail and try to open separate NPS account for different members in your family. For those tax payers who are having high income and wealth, it is recommended that two tier account in NPS should also be obtained. Finally if you are going to complete sixty years of age during the year 2013, then you should be more careful to immediately open NPS account in your name. This is mainly because of the fact that once you have completed sixty years of age, you cannot open a new NPS Account. Please note that after sixty years of age one cannot go in for opening an NPS account. But if you have already opened NPS account, then you can continue contributing in the said account. Hence, in the year 2013 you should aim at bringing NPS as a preferred tool of investment in your family.
11. New Life Insurance Policies for your family:
Are you adequately insured ? Let this question be asked by every adult income-tax payer in his family. I would like every tax payer to take care of securing his family during the year against calamity. One of the best way to protect the family is to adequately insure all the family members. It is time now for you not just to count your Life Insurance Policies for different members in the family but to sit down and ponder whether all the family members are adequately insured. In most cases I am sure the answer that will come in conclusion would be that most of the family members are not adequately insured. Hence, during the year 2013 please take a call to answer the question whether you and your family members are adequately insured. Do not forget to take an insurance policy for your dear loving daughter too.
12. Rajiv Gandhi Equity Savings Scheme:
For all those tax payers who have never had any exposure in the stock market let the year 2013 be their first year for investing in the stock market. Firstly the action plan to enter into the stock market would be to open a Demat Account in your name. To inspire all those who have never had any exposure in the stock market tax incentive is being made available in the Income-tax Law in terms of the provision contained in section 80CCG whereby first time investors in the stock market can go in for making investment up to Rs. 50,000 and enjoy a tax deduction equal to 50 per cent of such investment. Thus, tax saving can be made by taking an exposure to Rajiv Gandhi Equity Investment Scheme and thereby cutting down your tax payment by Rs. 2,500 to Rs. 5,000.
13. Investment in Gold & Silver:
Purely from investment angle it makes no sense to invest in gold jewellery for use at a future point of time. Generally, it is seen that people buy jewellery specially during festive season specially when there is no making charges. This jewellery is being purchased for let us say the marriage of your dear daughter which however is to take place a decade later. Hence, it is recommended that in the year 2013 do buy jewellery when the purpose is to buy for your own use and wear but abstain from investing in jewellry in case you plan to use the jewellery for marriage in the family which will take place after a long interval because the jewellery would become outdated. It will however be better to go in for buying gold coins and investments through Gold ETF.
The author is Tax and Investment Consultant at