There is more to tax planning than exemptions available on savings.  With our advice, 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.

Our advice
¤ By careful planning, one can reduce tax liability substantially.
¤ Declaring at the start of the FY is most important
¤ Don't wait for last minute. Start in April and use monthly investments to reduce risk. It will be easier on your pocket as well.
¤ Try and achieve tax planning and also planning for your needs simultaneously ¤ Use tax efficient investment avenues. You should not be paying too much tax on their returns

Tax planning is not a device to reduce tax burden. In fact, it helps savings by investments in government securities. Savings reduce extravagance, and correspondingly inflation. Tax savings are permitted only for investment made i:n government securities and bonds of priority sectors which ultimately help the nation. Therefore, the savings in tax help the Central and state governments to mobilizes funds by way of investments and as such the government earns much by way of other benefits, by sacrificing small amount of tax. The Supreme Court in one case observed that "Tax planning may be legitimate provided it is within the framework of Law". By tax planning, the government is equally benefited.

Savings and investments are interconnected. Before making investments the person has to consider various factors such as

• Liquidity-when he requires the amount to meet the educational expenses of children,for marriage, house construction or for a secure future after retirement.
• Security of the investment.
• The return and tax on income on such investments.

This varies from person to person. A person by investing in NSC saves on his tax. However, the interest on the investment is taxable. Again, if the investment is made in PPF, he is not liable to pay the income tax on interest. But the period of NSC is six years whereas in the case of PPF the period of repayment is 5 years. However, a portion can be claimed after 7years. Thus the person who makes the investment has to consider whether he requires the amount after 5 years or he can wait for a longer period.

To make investments there should be savings. A lower income person also wants to save, but his gross income and day-to-day expenses don't leave him anything to save.