Keeping a track of income tax rules in money matters ensures peace of mind and healthy post returns in the hands of the investors. Here are some tips that make you wealthier in 2015
Tax and Investment Consultant,
Tax Guru: CNBC Awaaz
Well, the year 2015 has just started and for the benefit of our readers we will like to share with them ‘Fifteen important tips for Tax and Investment Planning’. These tips will surely help every tax payer to save some portion of his income-tax and also proper planning for his investment. Here are these fifteen tips :-
1. Cut down your tax payments
The first theme for the year 2015 should be to cut down all your tax payment and this is possible through two vistas. First is taking advantage of all exemptions and deduction and second is ensuring Income-tax file for every member in the family. If you are able to take care of these two vistas only then surely your year 2015 would be a wonderful year bringing lot of money for you as a result of tax planning and also making money grow for you by proper planning of investment based on the changes made by the Government relating to investment strategy in whole of year 2015.
2. Planning for elder family members
The next step in tax planning is to plan for a separate independent income-tax file of your Dada, Dadi, father and mother. This can be done through gift by you. Likewise, you can think of taking out Mediclaim Policy for your aged parents and this can help you to cut down your income-tax because you can enjoy additional deduction under section 80D amounting to Rs. 20000.
3. Tax Planning for the couple
In the year 2015 think of innovative ideas for tax planning for the couple and here
are some of the important points which should be taken into consideration by you :-.
(a) A separate income-tax file of the spouse.
(b) Taking care of non-clubbing provisions
(c) Maximising tax deduction under section 80C for you and your spouse separately .
(d) How a residential house for you and your spouse jointly owned by you would get you best deduction and maximum deduction of Rs. 2 lakhs per annum for each of you.
(e) Make payment of Mediclaim Policy Premium for you and enjoy tax deduction up to Rs. 15000.
4. Tax Planning for your Children
Three types of Children Tax Planning to be done :-.
(a) - For Married children - Plan for creating a separate income-tax file for your daughter in law if not already done. Avoiding transactions which cause clubbing of income.
- Create a new HUF file for your married children so that a new tax entity can be created.
(b) - For major unmarried children.
-Take education loan If the Income-tax file is not yet created of major unmarried children who are students, think of creating a separate Income-tax File through gift. No clubbing of income will arise.
(c ) - For minor children
-Plan right now some funds for your minor children so that growth is high, tax is nil for long term perspective. .
-The income of the minor child is clubbed with the income of the parents and only a deduction up to Rs. 1500 per annum is available. Hence, if you make a gift to your minor child, make the investment in such a manner that the income does not become taxable in the hands of the parents. Think of buying Mutual Fund and Direct investment in the name of the minor child in the stock Market so that at least after one year the income received becomes tax free. Also think of creating a Special Hundred Percent Welfare Trust for the minor child so that the income-tax file of your minor child can be started without attracting the clubbing provisions.
5.Tax Planning for your Spouse and new year gift from husband to wife
If we think of making a gift or a big gift to the spouse, the income thereof will be clubbed with the income of the husband. Hence, what is recommended is that as far as possible try to avoid making of the gift to the spouse but in the new year some gift and some memorable gift is definitely required to be given to your spouse specially when you want to stay peaceful in the family and I would like to suggest you to make a gift in the form of a Big No No. What is this No No.? This No No from tax planning is B B Not. Well the meaning of “B B Not” is Bank Balance Not. That is touch me not. Says the bank balance of your spouse. Don’t withdraw from the bank balance of your wife either for day to day household expenses or for travel or for children education expenses or for shopping. All these expenses in 90 per cent of the cases should only be met from tax planning angle by the poor husband. This is because if you don’t withdraw the money from the bank balance of your wife, then her balance accumulates and she is able to invest the money because all household expenses etc. etc. are taken care of by you. At least Mr. Husband if you cannot think of making a big gift for the year 2015 to your wife, at least think of this idea to provide “B B Not” formula i.e. touch me not formula of the bank balance of your wife.
6. Your Investment in Life Insurance Policies.
Make it a point that it is time now that one Sunday morning take out time to spend 2/3 hours on finding out whether you are adequately insured or not. Unfortunately when I meet tax payers, I find that in most cases their insurance coverage is limited to the investment which they are required to make in terms of section 80C of the Income-tax Act, 1961. May I suggest at this time now that looking in particular the fast life you live, you must devote sometime to access the actual need of insurance in your family and go beyond the tax deduction of 80C for making insurance premium payment for the family members. If you have taken a big loan either for car or for house or for big education loan for your children, then it is also time now to think and adopt the theme of getting a “Term Policy” equivalent at least to the total amount of the loan on your head. Hence, think and think and take out new investment for insurance policy during the year 2015.
7. Are you planning to become a Non-Resident Indian.
Your uncle has gone abroad. Your brother has gone abroad and so now it is your desire that you also want to go abroad for studies or for doing business. Well from tax angle the decision should be taken in the year 2015 that if you are interested to become a Non-Resident Indian, in that situation leave the country in the year 2015 not in January 2015 itself but think and plan to go abroad from the point of income-tax astrology between 1st April 2015 up to 30th September 2015. Well this is a tax astrological answer befitting this theme and that is that if you leave India during the above period, you would become a Non-Resident Indian and by chance if you leave India in October 2015 onwards, then it is not possible to become a Non-Resident Indian during the coming financial year. Hence, from tax planning point of view leave India and leave your friends and family members between 1st of April 2015 till 30th September 2015 and move anywhere in the world. Earn money. Bring money back and happy news no income-tax planning at all and this is because of the fact that non-Resident Indian is not required to pay income-tax for his foreign income. He will pay income-tax only on Indian income.
8.Prepare physical tally of your assets.
During the year 2015 I would like to suggest each and every person whether a small investor or a big investor or whether a serviceman or a retired person, it is time now to have a physical tally of all your assets during the year 2015. Once the tally is made, you will be sure of all your bank FDR or Mutual Funds or Shares and all your gold and diamond jewellery. Both husband and wife should prepare a physical tally of all the assets and this must be done at least once in a year. In the year 2015 think of having a physical tally of all your assets.
9. Tax Planning for Real Estate in the year 2015
I feel that Real Estate should be a good investment for you in the year 2015 and here are some of the important points which you may keep in mind while making your investment in the Real Estate.
1. Expected creation of 100 smart cities. Hence, invest and make profit.
2. Buy and sell property only with Circle Rate or else big tax problem coming to you.
3. When you buy the property, have a clear cut demarcation of the same.
4. For bright future buy the property jointly in the name of husband and wife with their individual funds and let both of them take the benefit of tax deduction.
5. Tax advantage of the upcoming affordable housing scheme which are being planned in different towns of India. Invest and make big profit.
6. Don’t sell your Real Estate before holding it for a minimum period of three years.
10.Gold, Silver and Diamond investments
I would like to recommend to our viewers that when the prices of the gold and silver further fall, at that time it would be a good idea to think of making a small little investment in the year 2015 in gold and silver and in raw diamonds. I am not in favour of buying more and more jewellery because the resale value will be lower and more particularly when you want to make investment in gold and if you want no wealth tax liability to come to you and also you want to take care of the theft of the gold , then it is time for you now from the year 2015 onwards think of buying not raw gold but of buying gold in Demat Account through Mutual Fund and also invest in gold bees.
11. New business in the year 2015
For those who are thinking of starting a new business it is time for them to encash the growing economy of the country and at least start one new business venture in the year 2015. Most important from tax planning point of view when you are thinking of starting a new business venture then first find out the tax entity in which your business should be started.
12. Investing in Stock Market in the year 2015
In the year 2015 I will see a blooming Stock Market. It is time now for the investor to think of making investment in the Stock Market and reaping the fruits in the year 2016 onwards. For those interested to invest in the Stock Market, the following tips are important :-
1. Think of investing and forgetting the sale of the same for a minimum period of one year so that the profit you get becomes tax free.
2. If you do not know where to invest in equity market, then think of investing through the Equity Mutual Fund only.
3. Do not make investment in Debt and other investment options of the Mutual Fund investment.
4. I expect in the year 2015 new investment proposals being made available by the Government of big investment in Government company shares. I feel it should be a good time to make investment in those shares..
13. Surplus money in buying second house or a commercial property
From tax point of view buying a second house property not for self occupation but only for getting rental income is a good idea. Similarly, making investment in commercial property for the purpose of getting rental income is also a good idea. The main important feature is that when you buy the property for letting it out, you get a deduction in respect of interest on loan without any upper limit. Hence, it is really a good idea.
14.Wait for Budget 2015
Yes, the Finance Minister will be presenting the budget on 28th February and I would suggest all my viewers that please keep your eyes and ears on your Budget so that you are able to get the plus point and the minus point of the budget 2015-16 and you can gear and plan your strategy of investment and tax saving based on the exemptions and deductions which are available as per the Finance Bill.
15. Miscellaneous points from Tax and Investment Planning point of view
Some of the small point to be taken care are as under :-
1.Plan for Succession Planning. Prepare Wills. Revise Wills.
2.Think of making investment in Tax Free Bonds issued by the Government.
3.Invest in KVP that is Kisan Vikas Patra particularly in the names of all those family members having income below the exemption limit or in the name of your parents who do not have taxable income. For you it is not advisable to invest in KVP but for family members, yes, you can invest.
4.Now relax and think of having on your agenda the first item as Health Care Management with peace, happiness, bliss at your command and then the money will be made available to you by tax and investment planning and finally do remember to adopt tax planning but not tax evasion.
I am sure if you keep in mind planning with reference to above mentioned Tax and Investment tips for the year 2015, then surely you would have a wonderful time in 2015.
The Author is Tax and Investment Consultant at New Delhi for the last over 45 years. E Mail: firstname.lastname@example.org