There is more to tax planning than exemptions available on savings. With our tips, you will pay the right amount of tax, not more and not less. You will also know how to tax proof your incomes and gains. After all, your capital is more productive in your hands and it can work wonders for you if planned properly.
Here Are some tips
The first theme should be to cut down all your tax payment and this is possible through two vistas. First is taking advantage of all exemptions and deduction and second is ensuring Income-tax file for every member in the family. If you are able to take care of these two vistas only then surely it will be bringing lot of money for you as a result of tax planning and also making money grow for you by proper Investment planning.
Planning for elder family members:
The next step in tax planning is to plan for a separate independent income-tax file of your Dada, Dadi, father and mother. This can be done through gift by you. Likewise, you can think of taking out Mediclaim Policy for your aged parents and this can help you to cut down your income-tax because you can enjoy additional deduction under section 80D amounting to Rs. 20000.
Tax Planning for the couple:
In the year 2015 think of innovative ideas for tax planning for the couple and here are some of the important points which should be taken into consideration by you :-.
Tax Planning for your Children:
Three types of Children Tax Planning to be done:-.
- A) For Married children - Plan for creating a separate income-tax file for your daughter in law if not already done. Avoiding transactions which cause clubbing of income. Create a new HUF file for your married children so that a new tax entity can be created.
- (B) For major unmarried children- Take education loan if the Income-tax file is not yet created of major unmarried children who are students, think of creating a separate Income-tax File through gift. No clubbing of income will arise.
- (C) For minor children- Plan right now some funds for your minor children so that growth is high, tax is nil for long term perspective. The income of the minor child is clubbed with the income of the parents and only a deduction up to Rs. 1500 per annum is available. Hence, if you make a gift to your minor child, make the investment in such a manner that the income does not become taxable in the hands of the parents. Think of buying Mutual Fund and Direct investment in the name of the minor child in the stock Market so that at least after one year the income received becomes tax free. Also think of creating a Special Hundred Percent Welfare Trust for the minor child so that the income-tax file of your minor child can be started without attracting the clubbing provisions.
5. Benefits of Private Trust:A. Private Trust:
- Private Trust can be formed for a single member benefit or for a group of members benefit.
- For Tax Planning - Ideal for a minor child till he/she attains majority or finishes his/her higher studies or until her marriage
- Tip: For each child let there be one trust
- Caution: Care should be taken while drafting the clauses of the trust deed to include investment methods (take the help of a professional in that case)
- A trust can be unregistered (no mandatory provision for registration)
- Using the trust deed PAN can be applied for.
B. Private (Discretionary/Specified) Trust:
- Whether there will be any tax incidence in the hands of the beneficiaries of the trust either at the time of creation of the trust or when they receive any benefits under the trust either out of income or corpus.
- Where it is discretionary trust, definitely, the beneficiaries can escape the rigor of section 56(2)(vii) since unless and until any distribution, either of income or corpus, is made, there is no certainty for the beneficiary as to what they will get from the trust.
C. On distribution from Private trust:
- On the other hand, when any money/property is distributed from the trust to the beneficiaries either by way of distribution of income or corpus and whether such distribution takes place during the subsistence of the trust or at the time of its dissolution, even then, the beneficiaries cannot be subjected to tax on the amount/assets received on distribution since they are already entitled to the same as per the trust deed.
6. Tax Planning - HUF
- Hindu Undivided Family can also claim basic tax exemption of Rs: 2000,000. [plus Investment Planning eligible for further deduction u/s 80C]
- HUF is not a created entity. Only its existence has to be proved.
- Individual Minors (below the age of 18) can also claim basic tax exemption of Rs: 2,00,000 (for boys and girls)
- Caution:Minors income generally is clubbed into the hands of the parent whose income is greater. Care should be taken to make their income to accrue in the name of a private trust (where the beneficiary is the minor child).
7. How Mom and Dad can cut your Tax:
- Invest in their name if they are in a lower tax bracket: Every adult enjoys a basic tax exemption limit. For senior citizens (above 60 years), the basic exemption limit is Rs: 2.5 lakh a year.
- If any or both of your parents do not have a high income but you have an investible surplus, you can plan tax by transferring money to them which can then be invested in their name.
- There is no tax on such gifts and the income from the investments will be treated as theirs.
- No such clubbing provisions come into play when money is transferred to a parent. There is also no limit on the amount you can give to your parents