The second step of tax planning lies in claiming all the exemptions and deductions which are permissible under the income tax law. A list of most such exemptions and deductions is contained in section 10 of the income tax act. This list has to be optimized depending on your facts and circumstances. If you and your family members are not claiming the optimum benefit of exemptions and deductions, then it is time to focus on investment planning in the group so that every family member gets full benefit of tax exemptions and tax deductions which covered in detail in chapter VIII
Various tax deductions are available under the IT law. One should try to avail of the benefit of these deductions for each and every member of the family. The various investment options that offer tax rebates should be reviewed keeping in mind various aspects like the age factor, etc. A checklist should be prepared of the various deductions permissible under the income tax law. Check whether each and every taxpaying member is claiming these. If special case is taken of this aspect, then it is legally possible to save a lot of income tax.
It is suggested that a chart be prepared of tax, deductions and exemptions for every family member for purpose of overall tax planning of the family. It would be worthwhile if a group tax chart is prepared containing details relating to income tax, tax deductions, net taxable income, tax deducted at source, rebate of tax, and finally, the net amount of income tax paid in the case of each family member. With the help of this one simple chart, you can achieve substantial tax planning as it will show up those who have not made optimum use of tax deductions.
Tax payers now enjoy straight deduction in terms in section 80C in respect of stipulated investments and expenditure to the time of Rs. 1.5 lakh. Moreover, such investment can be made in any single stipulated item; or a combination of the stipulated avenues of investment. Similarly, within the above limit the investment can also be made in Pension Plans in terms of Section 80CCC. As per the finance bill, 2015 additional deduction up to Rs. 50,000 over and above the deduction under Section 80C is available for contribution to the New Pension Scheme. Likewise, a further tax deduction on Rs. 50,000 is available on investments under Rajiv Gandhi Equity Saving Scheme 2012 as per Section 80CCG. As per the Finance act, 2013 this deduction is available for three consecutive years.
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