04 KALEIDOSCOPE
WHITEWORD
Crossword without the black spots!
Daily Investment Systematic
Investment Plan
Bharti Axa Investment Managers has come
out with what is probably the first Daily
Investment Systematic Investment Plan.
The idea is to reduce your average
purchase cost by entering the markets
everyday, with a small investment amount
starting right from Rs 300. This could be a
good instrument for salaried employees
who have income flow through out the
month.
People like sales professionals who get
reimbursements every week could use this
instrument to get into the habit of
compulsive saving.
For more details check
www.bhartiaxa-im.com
Previously, we looked at the basics of tax and why the
government gives you tax benefits. Let us look at
various parts of income tax calculation
TAXABLE INCOME = SUM OF ALL
INCOMES – EXEMPTED INCOME –
DEDUCTIONS – DEDUCTIONS
UPON REIMBURSEMENT
In simpler terms
The income on which the govern-
ment charges income tax is called as
Taxable Income. This is different
from your actual earnings. Although
you earn X amount of rupees Go-
vernment will only charge you on a
portion of it and give you “discount”
based on your contributions to na-
tion building activities directly or in-
directly.
Sum of all incomes
It is the total of all the kinds of
inflows into your kitty. This would
include- Your salary, Rent from your
property, Profit/loss from any busi-
ness you are involved in, Capital
gains (profit from any investment)
and all other types of incomes.
ERGO Monday, December 29, 2008
Tax planning
demystified
Exempted Income
These are those earnings which
will be subtracted from your total in-
come. This will include- Earnings
from Agriculture, Pension received
(provided your age is >45 years and
the pension is less than a third of
your total income), Insurance
claims, House rent allowance (40%
of your basic or actual received whi-
chever is lower), Upto Rs 800 as con-
veyance, Profits from long term
investments (>3 years) in Shares/Eq-
uity based mutual funds.
Deductions
These are the amounts subtracted
from your salary provided you have
spent money on them.
These include – EPF, PPF, Chil-
dren’s Fees, NSC, Principal compo-
nent of housing loan, Insurance
premium, Pension plan premium,
ELSS Mutual funds, Bank deposits
with >5 years lock in. You will get
benefit only on the amount actually
spent up to a maximum of Rs 1 lakh.
Apart from the above we get addi-
tional savings by spending on – med-
ical insurance premium(<15k),
Interest on housing loan (Upto 1.5
lakh), donations to registered char-
ity, Persons with physical disability
get a further deduction of Rs 50,000
to 75,000 based on severity.
Reimbursement based deductions
Only applicable if you show bills
and get reimbursement. This in-
cludes medical bills (upto 15K), LTA
(twice in four years), Food coupons,
Actual expenses on higher
education.
Bottomline
We need to try to make sure that
our taxable income is as low as pos-
sible by using all the above “dis-
counts” given by our Government.
Next week we will look at how best to
do it. ■