Be a wise owl with your taxes
Are you familiar with the old saying, “First earn the money, then worry about the taxes?” ? It sure seems to make sense. After all, your time and energy should be focused on climbing the ladder of success as quickly and efficiently as you can. In today’s competitive world, that is no mean task and demands the bulk of your attention. As you progress, your savings and investments will naturally also increase on the side, which means more taxes.
So work diligently and just put aside savings as and when you can. More taxes are nothing to be feared unless they eat up most of your income.5 simple ways to make this your reality are:
1. Invest in Tax Saving Schemes: Investing in schemes that are tax exempted will help you not only save on taxes but also add returns to them. Thanks to section 80 of the Income Tax Act. But before choosing the right tax saver, consider factors like safety, liquidity, and returns.
2. Do Invest in PPF: Aside from the 80 C deduction for your Rs.1.5 lac annual contribution, the entire interest earned as well as any maturity proceeds are tax-deductible. Renewing the PPF every 5 years could well lead to substantial interest earnings that could substitute otherwise taxable income. This may help you cover your retirement.
3. Invest in Long-Term Equity: The risk of partnering in the long-term expansion of markets and industry may fetch good returns in emerging markets like India. Choose to invest in equities you believe will spur in the long term, even if it is taxable, it will fetch you good returns.
4. Investing in Debt Funds: These could provide you with better returns at comparable risk to Fixed Deposits. But any Dividend income would be tax-exempt up to Rs.10 lacs p.a. This could potentially reduce your taxes as compared to other avenues. Though the reward comes with risk attached to it, cautiously pick the right funds that suit you.
5. opt for Mutual Funds: Banks may deduct applicable TDS every year even though you are not receiving the interest in hand every year, as accrued interest may be considered part of taxable income. On the other hand, reinvested Mutual Fund dividends end up availing of indexation benefits at the time of a long-term sale.
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