Tax planning: Don’t follow the herd

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SummaryThe Income Tax Act allows for several ways to save your tax outgo.

savings options sufficiently.

Further, experts believe that if you are planning to take a substantial home loan this year, it would be beneficial if you opt for a joint home loan with spouse or parents. This will lead to maximisation of savings as both owners will be able to claim tax deductions on the proportion of their loan holding. It is advisable that the person who falls in higher tax bracket should hold higher proportion of the loan to get the maximum benefit.

Loan for higher education: Taxpayers who have taken loans for higher education of their children or relatives, can avail of this benefit. The entire interest paid on the loan amount is allowed for deduction.

Rajiv Gandhi Equity Savings Scheme: Though the scheme has not been notified so far by the government, once operationalised, it would provide tax advantage to first-time retail investors with an annual income of up to Rs 10 lakh. Deduction of 50 per cent would be available for investing up to Rs 50,000 in equity. The scheme has a lock-in period of three years and it can be availed of only once in a lifetime. Stocks listed under the BSE 100 or CNX 100 or PSUs classified as Navratnas, Maharatnas or Miniratnas are eligible.

More options:- Apart from these options, individuals who live in rented accommodations can claim rent paid by them up to the House Rent Allowance (HRA) provided to them. Similarly, transport allowance is exempt up to Rs 800 per month, leave travel allowance (LTA) can be claimed twice in block of four years for domestic travel. The one thing you must avoid doing is rushing to make all these investments during February-March as almost always it leads to no or minimal returns on your investment due to lack of planning.

—shruti.srivastava@expressindia.com

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