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Tax planning is often a ritual that people do not give too much importance and is at best considered a necessary

evil. More often than not, for individuals, financial planning itself begins and ends with tax planning. The fact however is that tax planning is the first and a very important step towards financial planning. Suitability Analysis Today, tax-saving avenues' offer a good range of investment opportunities with different levels of risk, return and liquidity. Choose an appropriate mix of investments keeping in mind your financial objectives. Most of the time, we either take excessive risk or too less risk. Do not get carried away by past data, for eg. when markets are at a high and about to fall, equities will give you the best track record. On the contrary, when interest rates are at a peak, it is the best time to look at fixed income investment avenues and lock-in the interest rates for the long haul. Given the current condition of the markets, both equity and debt pose a fine opportunity to balance investments. Interest rates are at a peak and it may be appropriate to choose your bank deposits with 5 year lock in which will also provide you with tax benefit. At the same time, global cues have weakened the equities and most of the investments within this arena are available at lucrative valuations. If you already hold ELSS funds, it may be the right time to average your holding. Often, in the last minute frenzy of saving taxes, one dumps all their monies in one single avenue. Do take a planned and well-informed call. It is recommended to use a combination of investments and have an appropriate asset allocation, based on your risk appetite. Also keep in mind the tax you need to pay on the returns from the tax saving investments that you choose. Tax saving without investing! This is true contrarian style; where you squeeze benefits without any penny going out of your pocket and even better, when you squeeze benefits out of expenses. 1. Exemptions/Reimbursements First, one needs to look at the reimbursements that are available from the company and take maximum advantage of the same. Normal expenses that one incurs could help save tax. Some examples for the same would be Telephone / Fuel

Reimbursements, Meal Vouchers, Company Car, etc. Provisions for these could differ from company to company. A person in the lower tax slabs can sometimes reduce one's tax liability to nil with exemptions alone!
Minimum of : House Rent Allowance 1. Actual HRA 2. Rent Paid - 10% of Basic 3. 40% of Basic (Non-Metros) or 50% of Basic (Metros) EXEMPTIONS Conveyance Allowance Rs. 800 / Month 2 trips in a block of 4 Yrs Leave Travel Allowance Amount not exceeding Air Economy or Rail AC I Fare shall be for shortest distance and for a single destination Medical Reimbursement Rs. 15,000 / Annum

2. Deductions There are several deductions available. Section 80C allows a maximum limit of Rs. One Lakh across investments ranging from Provident Fund (including Public PF), Infrastructure Bonds, Fixed Deposits (>= 5 Yrs), NSC, Insurance / Pension Plan, Unit Linked Insurance (ULIP), Equity Linked Savings Scheme (ELSS), etc. It also includes tuition fees of children and also the repayment of principal on housing loan. In addition, Infrastructure bonds worth Rs. 20k / annum is allowed for tax benefit u/s 80CCF. Infact, given the interest rate levels, this seems to be a lucrative investment avenue. Whilst investing in infrastructure bonds, it is pertinent to look at the rating, a 'AA+' and above is considered safe for investing. You would also have the option of choosing annual payout of interest or cumulative, here again you can choose the one that suits you best. These are typically launched during the fag end of the financial year and the window to subscribe is open for a brief period ranging from 15 days to a month. A medical premium up to a maximum of Rs 15,000 qualifies for deduction. One can claim an additional Rs 20,000 for parents (senior citizens). 3. Home Loan benefits There is one more reason to buy a house the tax benefits on your home loan, but remember, this should definitely not be the sole reason. The EMI that you pay

towards such home loan has two components Interest and Principal repayment. We have seen that principal will qualify under Section 80C among other investment avenues. The interest component provides a separate deduction and has a limit of Rs. 1.5 lakh for a self-occupied property. As we welcome the New Year, let us vow to plan better and choose the contrarian way to create wealth and optimize on taxes - and not get caught in the last minute frenzy of tax planning! Tips for the week Understand your long-term financial goals this is the starting point. Start early so that you can do an effective financial plan, along with tax savings. This also gives you time to carefully evaluate various investment avenues. Some tax savings do not require you to invest take full advantage of them. Hedge your Health / Life Risks. You can claim a separate deduction for medical premium of your parents. Take an informed decision; understand various nuances of investment avenues such as the time frame for contributions and also the lock-in period for investments. If you find it difficult to manage enough money for tax saving investments every single time, use shorter-term products, so that maturity value can be used to save tax subsequently.