Thursday, November 8, 2012

How to save tax in India?

The income tax scene in India is quite dynamic. It changes with every budget and before people can understand the nuances of the current income tax, the next budget comes in which has some revised schemes. We, the normal citizens of India, are usually not well versed with all these things. These things can best be done in consultation with a tax planning expert who is from this background. They can not only help us save tax, but can also let us know in detail regarding how much tax we’ve to pay and how we can file our IT returns so that we can avoid any penalty that might be levied. After all, penalties really pinch hard even if they’re a small amount. It’s like losing a part of our money for nothing at all.

People do a lot of black-marketing and try to save taxes the wrong way. However, such techniques might get people caught in the long run. Even if they don’t, the person doing it lives under constant fear of being arrested. It is better to talk to a tax consultant who can show us some legal and right ways regarding how to save tax. Some of the common methods tax consultants suggest are:

• Investing money in Insurance: Insurance policies have since long been one of the most reliable ways to save money. Insurance comes in a lot of variety such as auto insurance, home insurance, health insurance, fire insurance etc. By investing money in Unit Linked Plans and Endowment policies, you can save a lot of tax. Not only will you save money, but you can do a lot of good to yourself by investing in policies since they give good returns after a point of time.

• Fixed Deposits: You might have heard of the term FD. Everyone talks about putting in money for FD! So what does an FD mean? FD stands for fixed deposit and it can be availed for a fixed duration such as 3 years, 5 years etc. The tenure depends on their scheme provided by banks. The interest rate on the same varies from bank to bank and just for your information, the RBI has made a hike in the interest rates of FDs between the tenure of 3-5 years. However, if you break your fixed deposit before it matures, you cannot avail the benefits of getting higher returns. In fact, you might attract some penalty.

• National Savings Certificate (NSC) – The National Savings Certificate is an attractive scheme by the Government of India to attract investors. Under such a scheme, you can invest money for tenure of 5 years and get an interest rate of 8.6% per annum! It’s a really good interest rate to obtain because even banks don’t offer such attractive rates. There’s a super saver plan as well, which goes on for tenure of 10 years.

These are all investment plans recognized by the income tax in India. They are legal ways and benefit an individual by giving good returns on investment.