Skip to main content

Income Tax Planning: Have extra income apart from salary? Time to Count your tax is now

THE second installment of advance tax for individuals has to be paid by December 15. This is an opportunity to ensure easy completion of the tax process on time.

However, a lot of people think that they are not impacted by the advance tax requirements, and hence, do not pay attention to this area. But in reality, there are reasons why individuals need to look at specific aspects of advance tax.


Salaried individuals: Under most circumstances salaried people are not concerned with advance tax because the required tax on their income is deducted by their employer at the time of paying the salary.

There is a factor here that needs attention, which is that the tax is deducted only with respect to their salary income.

In cases where an individual has given details of other income to their employer, it will also be taken into consideration for deduction of additional tax.

Usually individuals do not give details about their additional income to their employer.

This will result in a position where there will be other income on which tax will have to be paid. If this additional tax amount exceeds Rs 10,000, then the payment of advance tax becomes essential.

This is the reason why even the salaried should check their extra income, which includes interest earned, professional income earned or other onetime receipts, and calculate whether they have to pay any tax on this additional income.
Shortfall: People also believe that if there is some amount of tax that is deducted on their earned income then the process is complete. But this is not the case every time because the rate for the deduction of tax is often lower than what has to be paid.

So, for example, if the rate of deduction on interest earned is 10 per cent, the individual might have to actually pay income tax at 30 per cent on this figure.

This will again give rise to the need to pay advance tax as the difference between the two rates will still attract tax.

There are a lot of areas where such shortfalls may arise between the tax that has to be paid and the figure that is deducted at source when the salary is received.

This can also result in a position where the tax that needs to be paid keeps on increasing and this can be tackled through the advance tax payment route.


No last moment rush: In all areas of planning that involves money it is always better to start early and then complete the process over a period of time.

The same is true with respect to tax payment. There are various options over the year to pay part of the total tax liability in instalments and individuals should make use of the available opportunities.

If this is not done, the burden of entire payment will come right at the end of the financial year in March.

The month of March is usually a very stressful month as there are a lot of payments lined up including completing the necessary tax investments.

In such a situation, paying the entire tax amount in a single shot might add to the financial stress.

On the other hand, breaking up the payment over the year is easier to manage.

Apart from this, there is also a penalty in the form of interest that has to be paid if the schedule related to the advance tax payment is not met and due to this reason some attention to this area will be beneficial. The downside of ignoring advance tax is high and it can be easily avoided.

 

Popular posts from this blog

Mutual Fund Review: Religare Tax Plan

Tax Plan is one of the better performing schemes from Religare Asset Management. Existing investors can redeem their investment after three years. But given the scheme's performance, they can continue to stay invested   Given the mandated lock-in period of three years, tax saving schemes give the fund manager the leeway to invest in ideas that may take time to nurture. Religare Tax Plan's investment ideas revolve around 'High Growth', which the fund manager has aimed to achieve by digging out promising stories/businesses in the mid-cap segment. Within the space, consumer staples has been the centre of attention for the last couple of years and can be seen as one of the key reasons for the scheme's outperformance as compared to the broader market. It has, however, tweaked its focus and reduced exposure in midcaps as they were commanding a high premium. The strategy seems to have worked as it returned a 22% gain last year. Religare Tax Plan has outperformed BSE 100...

ICICI Prudential Balanced Fund

 ICICI Prudential Balanced Fund scheme seeks to generate long-term capital appreciation and current income by investing in a portfolio that is investing in equities and related securities as well as fixed income and money market securities. The approximate allocation to equity would be in the range of 60-80 per cent with a minimum of 51 per cent, and the approximate debt allocation is 40-49 per cent, with a minimum of 20 per cent. An impressive show in the last couple of years has propelled this fund from a three-star to a four-star rating. The fund has traditionally featured a high equity allocation, hovering at well over 70 per cent, which is higher than the allocations of the peers. But in the last one year, the allocation has been moderated from 78-79 per cent levels to 66-67 per cent of the portfolio. ICICI Prudential Balanced Fund appears to practise some degree of tactical allocation based on market valuations. Within equities, well over two-thirds of the allocation is parked i...

Stock Dividend Yields

During a bull run, it’s very easy to ignore stocks with high dividend yields. After all, what could be more enticing than a growth stock? But in times of crisis, these boring ones tend to be the most sought after. The reason being that not only do dividends provide a cushion when the market is in the doldrums but such stocks also tend to fall less. The lure of dividend yield stocks is not easy to ignore. These stocks offer capital appreciation as well as cash payments. But logically, any company that pays a substantial portion of its earnings in dividends is reinvesting less and, therefore, would grow at a slower pace. So the trade-off is between higher dividend yields for lower earnings growth. On the other hand, companies with high growth potential and volatile earnings tend to pay less by way of dividends, if at all. Such companies would rather reinvest their earnings to sustain their growth. The capital appreciation of growth stocks is obviously higher than in dividend yield ones. ...

Tax Planning: Income tax and Section 80C

In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:   Provident Fund (PF) & Voluntary Provident Fund (VPF) Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer's contribution. While employer's contribution is exempt from tax, your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. Public Provident Fund (PPF) An account can be opened wi...

JP Morgan ASEAN Offshore Fund

  JP Morgan ASEAN Offshore Fund - Invest Online JP Morgan ASEAN Offshore Equity Fund is an international equity mutual fund scheme that invests primarily in companies of countries which are part of the Association of South East Asian Nations (ASEAN). Most international funds , apart from those focused on the US market, have been struggling for sometime. This is because of the uncertainties in the global market. International funds are meant for investors who want to diversify their investments across geographies. If you haven't made your investment for this diversification, you should sell your investments in this scheme.   Best Tax Saver Mutual Funds or ELSS Mutual Funds for 2015 1. BNP Paribas Long Term Equity Fund 2. Axis Tax Saver Fund 3. IDFC Tax Advantage (ELSS) Fund 4. ICICI Prudential Long Term Equity Fund 5. Religare Tax Plan 6. Franklin India TaxShield 7. DSP BlackRock Tax Saver Fund 8. Birla Sun Life Tax Relief 96 9. Reliance Tax Saver (ELSS) Fund 10. HDFC TaxSaver...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now