However, when one looks at what goes into investment, the avenue like the exemptions, deductions and rebates can be used to augment future earning capacities or improving quality of life or even asset acquistion.
First, let's look at enhancing future earning capacities by investing into the Sec 80 C investment universe upto Rs 1 lakh without limit for most of them except the PPF.
Item (Holding period) : Pre-Tax rate of return pa
Bank Deposits 5 year, : Fixed rate *7.5-8%
ELSS 3 year (not assured): 30-50%
PF : 8.5%
PPF (lt 70,000) : 8%
PO FD 5 years : 8%
NSC 6 years : 8%
Infrastructural Bonds
(NHAI,REC) : 8-9%
Insurance Policies : 3-5%
It is true one can use the expenses route as well to save taxes. One can improve quality of life in that manner. The deductions for Educational expenses Sec 80(C), that for Health Insurance premiums Sec 80(D) and Donations to Charity Sec 80(G) are of this nature.
The interest you paid upto 1,50,000 Sec 24(b) on the Housing Loan and its principal repayments Sec 80 (C) effected also fetch you tax concessions while creating an asset.
Certain Capital Gains are not taxed at all....
- Sec 10(35) exempts Capital Gains from Mutual Fund units, if held for more than an year.
- Sec 10(38) exempts Capital gains arising out of Your equity investments held for more than 12 months
You get CG exemption under Sec 54 (EC) if you deposit within 6 months your sales proceeds upto Rs 50 lakhs in a financial Year of any assets into bonds issued by Rural Electrification Corporation or National Highways Authority of India.
Ceratin Incomes are also not taxed....
- Sec 10(15) exempts fully interest from post office term deposits
- Sec 10(33) exempts the income from Mutual Funds
- Sec 10(43) exempts Reverse Mortgage cash flows received by the Senior Citizens
Supplement your earning potential by leveraging on such opportunities. Planning will ... avoid or reduces surprises.
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