Indian Tax Saving Tips

Everyone seems to read about tax saving tips just before filing their returns. Now that March 31st is just three months away, here are few tax saving tips:

1. For Businessmen & Entrepreneurs, keep all business-related receipts. Keep track of what the receipts are for, and save them in a safe place.

2. Put your children on the payroll. By having them do some work for you, you’ll be able to shift some of your income that would be taxed at a higher rate to their lower tax bracket.

3. You can save more tax by obtaining gifts from older family members.

4. If you worships some deity, then you can have a private religious trust of one’s own chosen deity. Such a trust would be liable to assessment as a separate taxpayer under the category of artificial juridical person and would enjoy a separate exemption of Rs 1.10 lakh.

5. If you’ve done well with your investments and are looking at significant capital gains, prior to year-end is the time to offset some of those gains by selling a losing venture. But if you are making a loss, then you can carry forward that loss to next financial year.

7. Max out retirement plan contributions. Do this not just to save tax but also to secure your future when you will be old and week. Next generation kids might not care about you. Be prepared for the worst. Best would be to invest in pension scheme that also provides life insurance cover.

8. Put some money in tax saver Health/Medical Insurance plan. Its a must in today’s life due to rising medical and hospitalization expenses.

Though the two taxsaving instruments stated above don’t give much return on money invested, still I have preffered them over investing in high return tax saving instruments like ELSS.

9 ELSS funds are eligible for tax benefits under Section 80C (Income Tax Act, 1961), mutual funds alone can take care of most of your worry. One may also invest in FDs for tax benefits under Section 80C. Please remember that only 1 lakh can be saved under section 80C.

10. PPF: Returns are not very high, but if you’re looking for a safe, tax-friendly investment, consider investing in PPF for tax benefits under Section 80C.