BUDGET AND PLANNING
2008-2009

Income Tax was introduced for the first time in 1860 and later amended in 1961. Today inflation is so high that mere salary is not sufficient for a salaried man. Both Husband and wife should go for a job to meet out the expenditure for the family.

What is Gross Income - Salary and rental Income + Interest from fixed Deposits + Capital Gains + Business Income shall all together is Gross Income.

What is Advance Tax. - This is payable by all Men and Women who have no salary, but have other Incomes. The person has to calculate the Tax and remit it in a Bank as Four Installments. First during 15th of September ( 30% of he tax ), second during 15th of December ( 30% of the Tax ) and the final during 15th of March ( 40 % balance ). In a Nationalised Bank with the challan available in the Income Tax Department.

EXPENDITURE :-

As a Bachelor or a Spinster, the expenditure is Minimum. After Marriage the expenditure will climb up to the peak and then comes down when children get settled and move away. Your real expenditure is only between the age of 35 and 50. That is the time you require more Money to meet out Expenditure like 1) Rent 2) Unexpected Medical attention for self, wife and children 3) Comforts like purchase of Scooter, Car, Holiday Travel and 4) For Children's Higher Education.

How to save money, where to save money and how to multiply the available money is the BIG Question for a Salaried man

A Salaried man does not take it seriously. To save money to meet the above mentioned expenditure one has to plan his or her taxation. Planning your taxation is an Art.

Can an Honest Salaried Man or Women with their limited income become a crorepathy ?

The Answer is "YES THEY CAN".

"HOW"? ONLY BY PLANNING THEIR SAVINGS.

There are many Investments in India. Many agents approach you to sell these schemes / investments. Most of these Agents be it from L.I.C. or any institution will try to offer schemes which will be beneficial from their point of view rather than from the customer's need and benefit. They try to sell L.I.C's policies for long term. Remember taking long-term policies like 20 years / 25 years is easy, but premiums have to be paid without break. So to support this you must have other schemes, so that extra money is available there to draw.

How to take the entire salary home, and still save Rs. 1 lakh every year in Tax saving schemes?

Plan your 1 lakh savings for 5 years.

TYPE OF SAVING SCHEMES

1) L.I.C. Take one or two policies heavy ones and STOP it. See that they mature before the age of 50 years. So that you can use it for Good.

2) MUTUAL FUNDS You should have control over your Investments. So invest in Mutual Funds in such a manner that every year you get Returns.

3) POSTAL SAVINGS. NSC Certificates are good. It is one time investment. But Remember that the interest earned on NSC is Taxable.

4) PPF - The BEST scheme in the country today. Entire interest earned in PPF is fully Tax-free. It earns 9 % interest P.A. Compounded. You cannot withdraw the money for the first 6 years. But after that every year you can withdraw 50 % of the accumulated amount. The amount withdrawn is fully Tax-free. It can be opened in any Nationalised Bank or Post office. Any one can open the account with Rs.500 as minimum deposit. This is the only scheme, which allows you to invest in the name of your Wife and Children and still claim Tax benefit. You can continue the PPF account beyond your retirement and even till your Lifetime.

Section 24 (1) of I.T.Act - If any one purchases a flat or house in India and borrows money from bank, the interest paid on the loan every year is deductible from the gross income. If the house / flat is self occupied, up to Rs 1,50,000 is deductible from the Gross income. If the property is let out then unlimited interest is deductible from the gross income.

It is advisable to buy properties for the following reasons. 1) Appreciation of your property value.
2) Heavy Tax benefits.
3) Comfortable living after retirement in your own house.

EXAMPLE.

Gross salary earned during the year 3,50,000

Income from rent from your property ( - ) 1,49,000

Interest income from fixed deposits ( + ) 10,000

Section 80 C LIC, PPF, NSC etc., ( - ) 1,00,000

Section 80 D Mediclaim ( - ) 15,000

Gross 96,000

Taxable income Rs. 96,000

Tax payable -NIL-

The above person need not pay any Income tax at all.

Rental Income

Gross rent received during the year 2,40,000

Less Municipal Taxes 10,000 2,30,000

30 % Deduction 69,000

Net 1,61,000

Interest paid vInterest paid for housing loan in bank !,85,000

Interest paid to private parties 1,25,000

Total interest 3,10,000

( Less ) Rental Income 1,61,000 - 1,49,000 v Rs. 1,49,000 is negative income

A salaried man has got the following commitments namely
1) Food, Clothing and Shelter for his entire family
2) Day to day expenditure
3) School / college fees
4) Medical expenditure
He has to save a lot of money also for the future.

TIPS
1) One should invest in many mutual funds like L.I.C. Banks etc.,
2) Take good money back policy from L.I.C. of India.BR> 3) Open PPF account in the name of wife and children and keep investing what ever you like during the year. It is like savings bank account. It earns 9 % interest and also gives you tax benefits too.BR> 4) Buy a piece of land and keep it for 5 years and then sell it. Today's forest is tomorrow's paradise. But today's paradise is tomorrow's fish market. So buy land in a remote place so that one day that land becomes popular and your land's value also increases.
5) Invest in children's name small amounts to make it big for a latter day,
6) Make your wife an assesse. She can earn up to Rs. 1,45,000 in a year, but need not pay Income tax at all.
Plan well so that the husband and the wife jointly can earn Rs 3,50,000 and still need not pay even a single Rupee as tax at all.

REMEMBER

Any property purchased, fixed deposit made in bank, property sold by you, interest money from mutual funds, the I.T. department will know it and any day they may ask for the source. So don't fail to consult the auditor, pay the tax in time and avoid discomfort from the I.T. department. If you plan well, you can become a crorepathy.

Points to remember at the time of making investments.
1) Liquidity
2) capital appreciation
3) safety
4) Better dividends.
Money can grow if you wisely invest in time and in the right place.
Apply for PAN NO. for your self and for your spouse, it is very important. File the Tax returns in time to avoid penalties and prosecution. Disclose all your incomes to avoid punishment.
A.V.S SATHYANARAYANA
TAX AND MANAGEMENT CONSULTANT
1st FLOOR, STATION HEAD QUARTERES,
FORT ST GEORGE,
CHENNAI - 600 009

MOBILE NOS: 97911 23456 / 99401 12345 / 97898 98989 / 97909 09090