tax planning india
Utilize Your Money With Efficient Tax Planning Options
One of the prime concerns of the salaried and corporates is the taxation procedure. However, one cannot completely avoid this liability, through several deductions and exemption policies by the Indian Income Tax Act or the Section 80C or 80D can help you to lessen the taxable amount and carry on with some savings. The tax planning and Investment options under Section 80C and 80D is very popular among the Indian masses as it encourages to have monthly savings from their monthly income. Section 80C and 80D has many benefits for your personal tax planning. One must take its full advantage if the taxable amount is in the highest bracket, which can help you to reduce taxable amount by Rs. 1 lakh. It means that the savings can go up to Rs. 33, 0000 according to the provisions of section 80C.
For the financial year of 2009-2010, A maximum deduction of Rs. 1 lakh has been allowed by section 80C from your taxable amount which can be invested in any of the following:-
Life insurance premium- Under section 80C, any investment with Life insurance policy is eligible for income tax deduction. This also includes the premiums paid for your spouse or children. In case if both the spouses are having LIC policies and the spouse’s income is in the lowest slab, then by showing both the LIC premium, you can get more benefit of deduction under this section.
Any amount made to Provident Fund is deductible from the taxable income as per section 80C. Generally, it is deducted at the beginning of a month and is automatically cut from the salary of an individual. By opening a PPF account in any of the leading banks, you can save the taxable amount. The minimum amount is Rs. 500 and the maximum is Rs. 70,000.
Fixed deposits, National saving certificate- Any amount invested in fixed deposits for a term period greater or equal to 5 years is eligible for tax exemption as per section 80C. This is one of the most risk free investments as per some tax consultants.
Mutual fund investments in ELSS- Some mutual funds are known as Equity Linked Savings Schemes or ELSS, which are eligible for tax exemption under section 80C. Although a certain kind of mutual funds are eligible under section 80C. These tax saving mutual funds have a lock-in period of about 3 years with something like ‘tax saving’ with their name. So it is advisable to consult a tax consultant in order to make sure whether the mutual fund is an ELSS or not.
These are some of the most popular form of tax savings options. Other options also include the property tax and other insurance schemes.
About the Author
Myself Aditi Malhotra from New Delhi, India looking forward for exploring and writing articles, blogs on new topics.
What happens to my 401K if I leave the US for India?
I plan to leave for India in another 6-7 years. Currently I am enrolled in a company specific 401K plan. Will I get taxed in both India and the US upon withdrawal? What about early penalty since I’m leaving the country for good? At the time I expect to become a US citizen (Currently H1B holder with Green Card applied for). Any help will be appreciated.
Also, can I use a (no-penalty) loan from 401K towards my first home purchase when the property is in India?
Links supporting answers would be ideal but not necessary.
You do not have to take out your money from 401k. Let it sit there. You can manage your account online and its legal to have your money sit in 401(k) while you move out of US.
When you retire, you will pay US taxes and then Indian government might want its share of tax. But there are laws to avoid double taxation. Since you will be paying taxes in US, you will not be paying taxes in India. Atleast not full tax rate.
Do not take out the money from 401k when you leave US. That will require you to pay US Taxes + US 10% Penalty. Plus the hassle of double taxation forms in India. While you are settling there, you do not want another paperwork in your table.
And yes, as Ethens pointed out above, you can roll it over to an IRA. which is a much better option.
My strong advice, do not take out money from your nest egg. Its going to hurt you 100% guaranteed.
No offense. I am from India too. But to be honest, no one goes back (with few exceptions). Its a moving target. You wait for green card, then you wait for citizenship. Then you wait until your kids finish high school and then wait until they graduate and then wait until they get married and get settled. And then after that you retire but why will you return when your kids are living here and you have grand children.
As I said I have seen exceptions. But in most cases, no one returns. I am from India I love that country. But I also love the freedom and quality of life I get here in United States.
Tax Planning in India
No filing of tax returns if salary is only income
In a big relief from cumbersome tax filing process for the salaried class, Finance Minister Pranab Mukherjee on Monday proposed to exempt them from filing tax returns unless they have other sources of income.