Tax planning is a process of looking at various tax options in order to determine when, whether, and how to conduct business and personal transactions so that taxes are eliminated or reduced. As an individual taxpayer, and as a business owner, you will often have the option of completing a taxable transaction by more than one method. The courts strongly back your right to choose the course of action that will result in the lowest legal tax liability. In other words, tax avoidance is entirely proper.
WHAT IS TAX PLANNING?
Tax planning is an essential part of your financial planning. Efficient tax planning enables us to reduce our tax liability to the minimum. This is done by legitimately taking advantage of all tax exemptions, deductions rebates and allowances while ensuring that your investments are in line with your long term goals.
OBJECTIVES OF TAX PLANNING
* Reducing the amount of taxable income
* Reducing your tax rate
* Controlling the time when the tax must be paid.
* Claiming any available tax credits
* Controlling the effects of the Alternative minimum tax
* Avoiding the most common tax planning mistakes.
WHAT TAX PLANNING IS NOT...
* Tax Planning is NOT tax evasion. It involves sensible planning of your income sources and investments. It is not tax evasion which is illegal under Indian laws.
* Tax Planning is NOT just putting your money blindly into any 80C investments.
* Tax Planning is NOT difficult. Tax Planning is easy. It can be practiced by everyone and with a very little time commitment as long as one is organized with their finances.
SUMMARY OF IMPORTANT INCOME TAX PROVISIONS 2010-2011
NEW TAX RATE FOR INDIVIDUALS
INDIVIDUAL [OTHER THEN WOMEN AND SENIOR CITIZEN]
Income Tax Slabs for ay 11-12 |
S.No. | Income Range | Tax percentage |
1 | Up to Rs 1,60,000 | No tax |
2 | 1,60,001 to 5,00,000 | 10% |
3 | 5,00,001 to 8,00,000 | 20% |
4 | Above 8,00,001 | 30% |...