Why you should plan tax at beginning of new financial year
April, 12th 2013
Q: It's the beginning of a new financial year and for those investors who want to proactively begin doing their tax planning, what suggestions would you give?
A: It is important to start planning now because one has the whole year to execute that plan. Planning is not limited to investment. Definitely, when one is planning for investment in instrument, which qualify for claiming deduction under section 80C, 80CCC or 80CCD etc, for that one should invest for example if one is investing in Public Provident Fund (PPF), it is better to invest at the beginning of the year instead of investing at the end of the financial year so that one earn interest for full year.
Also Read: Last minute Tax Planning Tips
Apart from that if one has sold any long-term capital asset in financial year 2013 and wants to save capital gained tax on that then one can invest that money in a new residential house. Capital assets like residential house or plot of land, commercial property or gold etc has been sold then to save the tax one will have to invest in a residential house. A person has two years time to invest that money in a new residential house from the date of sale, but before filing income tax return (ITR) because now one will file ITR for financial year ‘12-13. Therefore, before filing the ITR, if one is not going to buy a house then one should invest that money in a capital gain account scheme (CGAS) so that when later one want to buy a house, one can use that money. However, one cannot use that money for any other reason than buying the house, if one wants to save capital gain tax.
Second, if one owns a joint property and a loan is taken on that and both the partners want to claim equal deduction in income tax towards payment of principal as well as interest -- usually equated monthly installments (EMI) will go from one account only, but other person who is not paying EMI should transfer 50 percent of EMI in the account of the person who is paying EMI to prove that both are contributing equally in that EMI only then both can claim deduction towards principal and interest.